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Estimates of Technology and Convergence: Simulation Results

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  • Graeme Wells

    (University of Tasmania)

  • Thanasis Stengos

    (Department of Economics and Finance, University of Guelph, Guelph, Ontario, Canada)

Abstract

Using a Solow-Swan model with a stochastic saving rate and stochastic productivity we analyse the distributions of parameter estimates that emerge under various choices of technology, and of the dimension of the panel on which cross-section regressions are based. There are distinct asymmetries that characterise these distributions. These asymmetries become more pronounced when the effects of a near-unit root in the productivity shock become magnified over a longer time horizon and when the underlying production function is not Cobb-Douglas. Consequently, relying on traditional econometric transformations of these parameter estimates based on symmetric distributions, such as t ratios, will be quite misleading if one tries to assess technology parameters and ß -convergence.

Suggested Citation

  • Graeme Wells & Thanasis Stengos, 2010. "Estimates of Technology and Convergence: Simulation Results," Ekonomia, Cyprus Economic Society and University of Cyprus, vol. 13(2-1), pages 97-108, Winter-Su.
    • Handle: RePEc:ekn:ekonom:v:13-14:y:2010-2011:i:2-1:p:97-108
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    References listed on IDEAS

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    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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