Dynamic panels with predetermined regressors: likelihood-based estimation and Bayesian averaging with an application to cross-country growth

Enrique Moral-Benito

No 1109, Working Papers from Banco de España

Abstract: This paper discusses likelihood-based estimation of linear panel data models with general predetermined variables and individual-specific effects. The resulting (pseudo) maximum likelihood estimator is asymptotically equivalent to standard GMM but tends to have smaller finite-sample biases as illustrated in simulation experiments. Moreover, the availability of such a likelihood function allows applying the Bayesian apparatus to this class of panel data models. Combining the aforementioned estimator with Bayesian model averaging methods we estimate empirical growth models simultaneously considering endogenous regressors and model uncertainty. Empirical results indicate that only the investment ratio seems to robustly cause long-run economic growth. Moreover, the estimated rate of convergence is not significantly different from zero.

Keywords: dynamic panel estimation; maximum likelihood; weak instruments; growth regressions; bayesian model averaging (search for similar items in EconPapers)
JEL-codes: C11 C33 O40 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2011-05
New Economics Papers: this item is included in nep-ecm and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1109

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