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

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  • Antonio Ciccone
  • Elias Papaioannou

Abstract

Empirical cross-industry cross-country models are applied widely in economics, for example to investigate the determinants of economic growth or international trade. Estimation generally relies on US proxies for unobservable technological industry characteristics, for example industries' dependence on external finance or relationship-specific inputs. We examine the properties of the estimator and find that estimates can be biased towards zero (attenuated) or away from zero (amplified), depending on how technological similarity with the US covaries with other country characteristics. We also develop an alternative estimator that yields a lower bound on the true effect in cross-industry cross-country models of comparative advantage.

Suggested Citation

  • Antonio Ciccone & Elias Papaioannou, 2016. "Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics," NBER Working Papers 22368, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22368
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    3. van Hoorn, Andre, 2017. "Social trust, workplace organization, and the comparative advantage of nations," MPRA Paper 80017, University Library of Munich, Germany.
    4. van Hoorn, Andre, 2018. "The Political Economy of Automation: Occupational Automatability and Preferences for Redistribution," MPRA Paper 86460, University Library of Munich, Germany.
    5. 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.
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    9. 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.
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    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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