Mastering Panel 'Metrics: Causal Impact of Democracy on Growth

Shuowen Chen, Victor Chernozhukov and Iv\'an Fern\'andez-Val

Papers from arXiv.org

Abstract: The relationship between democracy and economic growth is of long-standing interest. We revisit the panel data analysis of this relationship by Acemoglu, Naidu, Restrepo and Robinson (forthcoming) using state of the art econometric methods. We argue that this and lots of other panel data settings in economics are in fact high-dimensional, resulting in principal estimators -- the fixed effects (FE) and Arellano-Bond (AB) estimators -- to be biased to the degree that invalidates statistical inference. We can however remove these biases by using simple analytical and sample-splitting methods, and thereby restore valid statistical inference. We find that the debiased FE and AB estimators produce substantially higher estimates of the long-run effect of democracy on growth, providing even stronger support for the key hypothesis in Acemoglu, Naidu, Restrepo and Robinson (forthcoming). Given the ubiquitous nature of panel data, we conclude that the use of debiased panel data estimators should substantially improve the quality of empirical inference in economics.

Date: 2019-01
New Economics Papers: this item is included in nep-ecm, nep-gro and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://arxiv.org/pdf/1901.03821 Latest version (application/pdf)

Related works:
Journal Article: Mastering Panel Metrics: Causal Impact of Democracy on Growth (2019)
Working Paper: Mastering Panel Metrics: Causal Impact of Democracy on Growth (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1901.03821

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().