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

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  • Roberto Basile

    ()

  • Sergio Destefanis

    ()

  • Mauro Costantini

    ()

Abstract

There is a plethora of studies of regional production functions using stationary panel data. Only some recent works consider non-stationary panel data. All of them assume the hypothesis of cross-section independence. Here, we claim that the independence assumption is too strong when regional data are used. In this paper, the cross-section independence assumption is released and cross-sectional dependence is assumed. First, unit roots and cointegration properties of the panel dataset are properly investigated by using newly developed tests for cross-sectionally dependent panels. Second, dynamic OLS (DOLS) and recent regression models for cross-sectionally correlated panels are used to estimate the cointegrated relationship between value added, physical and human capital, for Italian regions over the period 1970-1998.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa05p171.

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Date of creation: Aug 2005
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Handle: RePEc:wiw:wiwrsa:ersa05p171

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Cited by:
  1. 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, University of Petrosani, Romania, vol. 9(1), pages 129-142.
  2. 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, University of Petrosani, Romania, vol. 8(1), pages 95-124.
  3. Francis Teal & Markus Eberhardt, 2010. "Productivity Analysis in Global Manufacturing Production," Economics Series Working Papers, University of Oxford, Department of Economics 515, University of Oxford, Department of Economics.
  4. Francis Teal & Markus Eberhardt, 2008. "Modeling Technology and Technological Change in Manufacturing: How do Countries Differ?," Economics Series Working Papers, University of Oxford, Department of Economics 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, University of Petrosani, Romania, vol. 10(3), pages 69-86.

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