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GMM Estimation of Empirical Growth Models

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Author Info
Stephen Bond (Nuffield College and Institute for Fiscal Studies)
Anke Hoeffler (St Antony's College and Centre for the Study of African Economics)
Jonathan Temple () (Department of Economics, University of Bristol)

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Abstract

This paper highlights a problem in using the first-difference GMM panel data estimator cross-country growth regressions. When the time series are persistent, the first-differenced GMM estimator can be poorly behaved, since lagged levels of the series provide only weak instruments for subsequent first-differences. Revisiting the work of Caselli, Esquivel and Lefort (1996), we show that this problem may be serious in practice. We suggest using a more efficient GMM estimator that exploits stationarity restrictions, and this approach is shown to give more reasonable results than first-differenced GMM in our estimation of an empirical growth model.

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Publisher Info
Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2001-W21.

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Length: 35 pages
Date of creation: 12 Sep 2001
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Handle: RePEc:nuf:econwp:0121

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Web page: http://www.nuff.ox.ac.uk/economics/

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Related research
Keywords: convergence growth generalised method of moments weak instruments.

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Find related papers by JEL classification:
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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References listed on IDEAS
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.:
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    Other versions:
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  23. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July. [Downloadable!] (restricted)
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