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Collinearity in growth regressions: The example of worker remittances

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  • Ziesemer, Thomas

    (UNU-MERIT, Maastricht University)

Abstract

The sign of worker remittances in growth regressions is heavily disputed in the literature. Comparing two growth regressions with different signs for the remittance variable we show that collinearity with the lagged dependent variable might indicate that collinearity should be investigated comprehensively and might lead to a change in specifications which differ in the variance inflation factors (VIF). In our case the variance inflation factor for remittances depends on the use of a five or one-year lag of the lagged dependent. In the regression with a VIF below ten, the standard critical value, the sign of remittances is positive.

Suggested Citation

  • Ziesemer, Thomas, 2009. "Collinearity in growth regressions: The example of worker remittances," MERIT Working Papers 2009-020, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2009020
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    References listed on IDEAS

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    More about this item

    Keywords

    Growth; Remittances;

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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