TY  - JOUR
AU  - Hauk,William R.
AU  - Wacziarg,Romain
TI  - A Monte Carlo Study of Growth Regressions
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 296
PY  - 2004
Y2  - January 2004
UR  - http://www.nber.org/papers/t0296
L1  - http://www.nber.org/papers/t0296.pdf
N1  - Author contact info:
Romain Wacziarg
Anderson School of Management at UCLA
C-510 Entrepreneurs Hall
110 Westwood Plaza
Los Angeles, CA 90095-1481
Tel: 310 825 4507
E-Mail: wacziarg@ucla.edu
AB  - Using Monte Carlo simulations, this paper evaluates the bias properties of common estimators used in growth regressions derived from the Solow model. We explicitly allow for measurement error in the right-hand side variables, as well as country-specific effects that are correlated with the regressors. Our results suggest that using an OLS estimator applied to a single cross-section of variables averaged over time (the between estimator) performs best in terms of the extent of bias on each of the estimated coefficients. The fixed-effects estimator and the Arellano-Bond estimator greatly overstate the speed of convergence under a wide variety of assumptions concerning the type and extent of measurement error, while between understates it somewhat. Finally, fixed effects and Arellano-Bond bias towards zero the slope estimates on the human and physical capital accumulation variables.
ER  -