Note on the Interpretation of Convergence Speed in the Dynamic Panel Model
Studies using the dynamic panel regression approach have found the speed of income convergence among the world and regional economies to be high. For example, Lee et al. (1997, 1998) report the income convergence speed to be 30% per annum. This note argues that their estimates may be seriously overstated. Using a factor model, we show that the coefficient of the lagged income in their specification may not be the long-run convergence speed, but the adjustment speed of the short-run deviation from the long-run equilibrium path. We give an example of an empirical analysis, where the short-run adjustment speed is about 40%.
|Date of creation:||Jan 2011|
|Date of revision:|
|Contact details of provider:|| Postal: 2-1 Rokkodai, Nada, Kobe 657-8501 JAPAN|
Phone: +81-(0)78 803 7036
Fax: +81-(0)78 803 7059
Web page: http://www.rieb.kobe-u.ac.jp/index-e.html
More information through EDIRC
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.:
- Phillips, Peter & Sul, Donggyu, 2002.
"Dynamic Panel Estimation and Homogenity Testing Under Cross Section Dependence,"
194, Department of Economics, The University of Auckland.
- Peter C.B.Phillips & Donggyu Sul, 2002. "Dynamic Panel Estimation and Homogeneity Testing Under Cross Section Dependence," Cowles Foundation Discussion Papers 1362, Cowles Foundation for Research in Economics, Yale University.
- Shioji, Etsuro, 2001. "Public Capital and Economic Growth: A Convergence Approach," Journal of Economic Growth, Springer, vol. 6(3), pages 205-27, September.
- Robert J. Barro, 1989.
"Economic Growth in a Cross Section of Countries,"
NBER Working Papers
3120, National Bureau of Economic Research, Inc.
- Shibamoto, Masahiko & Tsutsui, Yoshiro & Yamane, Chisako, 2016.
"Understanding regional growth dynamics in Japan: Panel co-integration approach utilizing the PANIC method,"
Journal of the Japanese and International Economies,
Elsevier, vol. 40(C), pages 17-30.
- Masahiko Shibamoto & Yoshiro Tsutsui & Chisako Yamane, 2009. "Understanding Regional Growth Dynamics in JAPAN: Panel Cointegration Approach Utilizing The PANIC Method," Discussion Paper Series 243, Research Institute for Economics & Business Administration, Kobe University, revised Mar 2016.
- Nazrul Islam, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1127-1170.
- Lee, Kevin & Pesaran, M Hashem & Smith, Ron, 1997.
"Growth and Convergence in Multi-country Empirical Stochastic Solow Model,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 12(4), pages 357-92, July-Aug..
- Kevin Lee & M. Hashem Pesaran & Ron Smith, 1996. "Growth and Convergence in a Multi-Country Empirical Stochastic Solow Model," Working Papers 9637, Economic Research Forum, revised Dec 1996.
- Kevin Lee & M. Hashem Pesaran & Ron Smith, 1998. "Growth Empirics: A Panel Data Approach—A Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 319-323.
When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2011-04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University)
If references are entirely missing, you can add them using this form.