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Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics

Author

Listed:
  • Antonio Ciccone
  • Elias Papaioannou

Abstract

Cross-industry cross-country models are used to address a wide array of questions in economics. They do so by analysing how the economic performance of industries in different countries depends on an interaction effect between industry and country characteristics. As the relevant industry characteristics are unobservable in most countries, they are approximated by industry characteristics in a benchmark country. We show that this approach generally yields biased estimates of the industry–country interaction effect. The sign of the bias depends on whether or not technologically similar countries tend to be similar in other country characteristics. We propose an alternative estimation approach.

Suggested Citation

  • Antonio Ciccone & Elias Papaioannou, 2023. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," The Economic Journal, Royal Economic Society, vol. 133(649), pages 130-158.
    • Handle: RePEc:oup:econjl:v:133:y:2023:i:649:p:130-158.
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    File URL: http://hdl.handle.net/10.1093/ej/ueac047
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    Cited by:

    1. Damiani, Mirella & Pompei, Fabrizio & Andrea, Ricci, 2018. "Labour shares, employment protection and unions in European economies," MPRA Paper 91300, University Library of Munich, Germany.
    2. Battisti, Michele & Gatto, Massimo Del & Parmeter, Christopher F., 2022. "Skill-biased technical change and labor market inefficiency," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    3. De Sousa, José & Guillin, Amélie & Lochard, Julie & Silve, Arthur, 2023. "Trust and specialization in complexity: Evidence from U.S. states," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 332-353.
    4. van Hoorn, Andre, 2017. "Social trust, workplace organization, and the comparative advantage of nations," MPRA Paper 80017, University Library of Munich, Germany.
    5. van Hoorn, Andre, 2018. "The Political Economy of Automation: Occupational Automatability and Preferences for Redistribution," MPRA Paper 86460, University Library of Munich, Germany.
    6. Peter S. Eppinger & Katja Neugebauer, 2022. "External financial dependence and firms’ crisis performance across Europe," Empirical Economics, Springer, vol. 62(2), pages 887-904, February.
    7. Minh-Phuong Le & Lisa Chauvet & Mohamed Ali Marouani, 2023. "The Great Lockdown and the Small Business: Impact, Channels and Adaptation to the Covid Pandemic," Working Papers 1681, Economic Research Forum, revised 20 Dec 2023.
    8. Le, Minh-Phuong & Chauvet, Lisa & Marouani, Mohamed Ali, 2024. "The Great Lockdown and the Small Business: Impact, Channels and Adaptation to the Covid Pandemic," World Development, Elsevier, vol. 182(C).
    9. Beutler, Toni & Grobéty, Mathieu, 2019. "The collateral channel under imperfect debt enforcement," European Economic Review, Elsevier, vol. 111(C), pages 336-359.
    10. Eddy Bekkers & Michael Landesmann & Indre Macskasi, 2017. "Trade in Services versus Trade in Manufactures: The Relation between the Role of Tacit Knowledge, the Scope for Catch up, and Income Elasticity," wiiw Working Papers 139, The Vienna Institute for International Economic Studies, wiiw.
    11. Léon, Florian, 2020. "The provision of long-term credit and firm growth in developing countries," Economic Modelling, Elsevier, vol. 90(C), pages 66-78.
    12. Kukharskyy, Bohdan, 2020. "A tale of two property rights: Knowledge, physical assets, and multinational firm boundaries," Journal of International Economics, Elsevier, vol. 122(C).
    13. Florian Leon, 2019. "The provision of long-term credit and firm growth," DEM Discussion Paper Series 19-08, Department of Economics at the University of Luxembourg.
    14. André van HoornBy, 2017. "Social trust, workplace organization, and the comparative advantage of nations," Oxford Economic Papers, Oxford University Press, vol. 69(4), pages 897-917.
    15. Brey, Björn & van der Marel, Erik, 2024. "The role of human-capital in artificial intelligence adoption," Economics Letters, Elsevier, vol. 244(C).
    16. José De Sousa & Amélie Guillin & Julie Lochard & Arthur Silve, 2020. "Trust and Specialization: Evidence from U.S. States," Cahiers de recherche 2010, Centre de recherche sur les risques, les enjeux économiques, et les politiques publiques.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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