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Empirical Economics

, Volume 51, Issue 1, pp 31–55 | Cite as

A Monte Carlo study of the BE estimator for growth regressions

  • Jan Ditzen
  • Erich Gundlach
Article

Abstract

A recent Monte Carlo study claims that the BE estimator outperforms other panel estimators in terms of average estimation bias in a dynamic specification of the Solow model in levels (Hauk and Wacziarg in J Econ Growth 14(2):103–147, 2009). Our simulation results show that the reported performance of the BE estimator depends on the selected parameterization of the data generating process. Using alternative parameter values, a different model specification, and a restricted cross-section estimator, we find that the BE estimator tends to produce a coefficient of the lagged endogenous variable that is biased toward 1.

Keywords

Monte Carlo simulations Dynamic panel specification  BE estimator Solow model Convergence rate 

JEL Classification

C15 C23 O47 

Notes

Acknowledgments

We are grateful to two anonymous referees and the associate editor Badi Baltagi for many constructive suggestions on earlier versions, to Bill Hauk and Romain Wacziarg for sharing their Stata code, and especially to Bill Hauk for patiently explaining many details of the code to one of us.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2015

Authors and Affiliations

  1. 1.Heriot-Watt UniversityEdinburghScotland, UK
  2. 2.Hamburg University and GIGA German Institute of Global and Area StudiesHamburgGermany

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