Estimates of Technology and Convergence: Simulation Results
Using a Solow-Swan model with a stochastic saving rate and stochastic productivity we analyse the distributions of parameter estimates that emerge under various choices of technology, and of the dimension of the panel on which cross-section regressions are based. There are distinct asymmetries that characterise these distributions. These asymmetries become more pronounced when the effects of a near-unit root in the productivity shock become magnified over a longer time horizon and when the underlying production function is not Cobb-Douglas. Consequently, relying on traditional econometric transformations of these parameter estimates based on symmetric distributions, such as t ratios, will be quite misleading if one tries to assess technology parameters and ß -convergence.
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Volume (Year): 13-14 (2010-2011)
Issue (Month): 2-1 (Winter-Summer)
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