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Estimating cross-industry cross-country models using benchmark industry characteristics

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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.

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File URL: https://econ-papers.upf.edu/papers/1235.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1235.

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Date of creation: Sep 2010
Date of revision: Jun 2016
Handle: RePEc:upf:upfgen:1235
Contact details of provider: Web page: http://www.econ.upf.edu/

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