Economics Asked by user6171 on April 25, 2021
I estimated growth regressions for several EU countries. In each of them, the sign of “initial GDP”‘s coefficient is statistically significant but positive, which contradicts growth theory as well as most of other published papers on this topic. I tried to change the variables, the period, etc. but it remains positive.
I can’t find any explanation for this result in the literature, which would imply that there is no growth convergence among European countries.
Did anybody already face this problem? How did you solve this? I can’t find the source of this problem. Personally, I replaced “initial GDP” by “lagged (one period) GDP” but it would be better if I could keep “initial GDP” among the explanatory variables.
It's really difficult to give a satisfactory answer without having the data at hand. I would do two things:
Check carefully the data and computation of growth rates. By experience, it happens that some "particular" result is the consequence of data or computation issues. You may for example observe any issue by plotting your growth rates and initial GPDs with the name of the countries.
Use your data but exactly the same period, same countries and same methodology than the literature and check if you still find a contradictory result. Then, you can mix: use the same source of data, same countries, same period but your methodology, etc...
Answered by emeryville on April 25, 2021
If I understand your question...
This would be something best handled by closely looking at your residuals.
Your unobserved variation is the single most important statistical insight when it comes to accurate empirical examination. I could almost guarantee you're dealing with serial correlation, some simultaneity issues, and possibly multicollinearity. These issues are generally best tackled through autoregressive vector specifications to avoid the issues of causality.
Answered by aisync on April 25, 2021
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