Unit root and cointegration tests for cross-sectionally correlated panels. Estimating regional production functions

Roberto Basile (robertobasile66@yahoo.it), Mauro Costantini and Sergio Destefanis

CELPE Discussion Papers from CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy

Abstract: This paper employs recently developed non stationary panel methodologies that assume some cross-section dependence to estimate the production function for Italian regions in the industrial sector over the period 1970-1998. The analysis consists in three steps. First, unit root tests for cross-sectionally dependent panels are used. Second, the existence of a co-integrating relationship among value added, physical capital and human capital-augmented labor is investigated. The Dynamic OLS (DOLS) and Fully modified (FMOLS) estimators developed by Pedroni (1996, 2000, 2001) and the Panel Dynamic OLS (PDOLS) estimator proposed by Mark and Sul (2003) are then used to estimate the long run relationship between the variables considered.

Keywords: panel cointegration; cross-section dependence; production function (search for similar items in EconPapers)
JEL-codes: C15 C33 D24 (search for similar items in EconPapers)
Date: 2005-05
New Economics Papers: this item is included in nep-eff, nep-ets and nep-geo
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Citations: View citations in EconPapers (4)

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Working Paper: Unit root and cointegration tests for cross-sectionally correlated panels. Estimating regional production functions (2005)
Working Paper: Unit root and cointegration tests for cross-sectionally correlated panels - Estimating regional production functions (2005)
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