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Unit root and cointegration tests for cross-sectionally correlated panels. Estimating regional production functions

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Author Info
Roberto Basile (ISAE - Institute for Studies and Economic Analyses and University of Macerata)
Mauro Costantini () (ISAE - Institute for Studies and Economic Analyses and University of Rome "La Sapienza")
Sergio Destefanis (University of Salerno)

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Abstract

This paper employs recently developed non stationary panel methodologies that assume some cross-section dependence to estimate the production function for Italian regions in the industrial sector over the period 1970-1998. The analysis consists in three steps. First, unit root tests for crosssectionally dependent panels are used. Second, the existence of a cointegrating relationship between value added, physical and human capital variables is investigated. The Dynamic OLS (DOLS) and Fully modified (FMOLS) estimators developed by Pedroni (1996, 2000, 2001) and the Panel Dynamic OLS (PDOLS) estimator proposed by Mark and Sul (2003) are then used to estimate the long run relationship between the variables considered.

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Publisher Info
Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 53.

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Length: 37 pages
Date of creation: Jun 2005
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Handle: RePEc:isa:wpaper:53

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Related research
Keywords: Panel Cointegration; Cross-section Dependence; Production;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity

References listed on IDEAS
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    Other versions:
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  25. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(03), pages 597-625, June. [Downloadable!]
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  28. Andrew Levin & Chien-Fu Lin, 1993. "Unit Root Tests in Panel Data: New Results," University of California at San Diego, Economics Working Paper Series 93-56, Department of Economics, UC San Diego. [Downloadable!]
  29. McCoskey, Suzanne & Kao, Chihwa, 1999. " Testing the Stability of a Production Function with Urbanization as a Shift Factor," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 671-90, Special I. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Floro Ernesto Caroleo – Gianluigi Coppola, 2005. "The Impact of the Institutions on Regional Unemployment Disparities," CELPE Discussion Papers 98, CELPE (Centre of Labour Economics and Economic Policy), University of Salerno, Italy. [Downloadable!]
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