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A proxy-variable search procedure

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  • Jaqueson K. Galimberti

    ()
    (Federal University of Santa Catarina (UFSC))

Abstract

This paper proposes a proxy-variable search procedure, based on a sensitivity analysis framework, aiming to provide a useful tool for the applied researcher whenever he faces measurement or proxy-variable uncertainties. Extending from the sensitivity analysis literature it proposes two main methodological innovations. The first relates to the usage of a proxies grouping process to obtain averaged coefficient estimators for theoretical explanatory variables that have more than one possible measure. The second is a proposal of using the actual empirical distribution of the available data to base the inference over the confidence probabilities in choosing each possible measure as proxy for a theoretical variable. This is done using the widely known bootstrapped residuals technique. Besides the methodological main focus, an empirical application is presented in the context of cross-country growth regressions. This empirical application provided favorable evidence to the neoclassical view about the specification of the human capital effect on growth. The results also emphasized how neglecting educational quality differentials might lead to wrong conclusions about the robustness of the relationship between human capital accumulation and economic growth.

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File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I4-P6.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 4 ()
Pages: 2531-2541

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Handle: RePEc:ebl:ecbull:eb-09-00508

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Keywords: proxy-variable search; sensitivity analysis; estimation uncertainty;

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References

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  1. Judith Giles & Cara Williams, 2001. "Export-led growth: a survey of the empirical literature and some non-causality results. Part 1," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 9(3), pages 261-337.
  2. Altinok, Nadir & Murseli, Hatidje, 2007. "International database on human capital quality," Economics Letters, Elsevier, vol. 96(2), pages 237-244, August.
  3. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  4. Crain, W Mark & Lee, Katherine J, 1999. "Economic Growth Regressions for the American States: A Sensitivity Analysis," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 242-57, April.
  5. Angus Deaton & Alan Heston, 2008. "Understanding PPPs and PPP-based national accounts," NBER Working Papers 14499, National Bureau of Economic Research, Inc.
  6. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  7. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
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