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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)

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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Bibliographic Info

Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 53.

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

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

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References

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  1. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  2. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
  3. Zhijie Xiao & Peter C.B. Phillips, 2001. "A CUSUM Test for Cointegration Using Regression Residuals," Cowles Foundation Discussion Papers 1329, Cowles Foundation for Research in Economics, Yale University.
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  8. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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  29. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
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Citations

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Cited by:
  1. Francis Teal & Markus Eberhardt, 2010. "Productivity Analysis in Global Manufacturing Production," Economics Series Working Papers 515, University of Oxford, Department of Economics.
  2. Prasert Chaitip & Chukiat Chaiboonsri, 2009. "A Panel Cointegration Analysis: Thailand’s International Tourism Demand Model," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 9(1), pages 129-142.
  3. Chukiat Chaiboonsri & Prasert Chaitip & N. Rangaswamy, 2008. "A Panel Unit Root and Panel Cointegration Test of the Modeling International Tourism Demand in India," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 8(1), pages 95-124.
  4. Francis Teal & Markus Eberhardt, 2008. "Modeling Technology and Technological Change in Manufacturing: How do Countries Differ?," Economics Series Working Papers WPS/2008-12, University of Oxford, Department of Economics.
  5. Chukiat Chaiboonsri & Jittaporn Sriboonjit & Thanes Sriwichailamphan & Prasert Chaitip & Songsak Sriboonchitta, 2010. "A Panel Cointegration Analysis: An Application To International Tourism Demand Of Thailand," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 10(3), pages 69-86.

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