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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.

Suggested Citation

  • Roberto Basile & Sergio Destefanis & Mauro Costantini, 2005. "Unit root and cointegration tests for cross-sectionally correlated panels - Estimating regional production functions," ERSA conference papers ersa05p171, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa05p171
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    Cited by:

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    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, vol. 8(1), pages 95-124.
    3. 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.
    4. 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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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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