Download This PaperUnit Root and Cointegration Tests for Cross-Sectionally Correlated Panels. Estimating Regional Production Functions
37 Pages Posted: 10 Oct 2006
Date Written: June 2005
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 between value added, physical and human capital variables 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
JEL Classification: C33, C15, D24
Suggested Citation: Suggested Citation
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