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Estimating cross-industry cross-country models using benchmark industry characteristics

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Abstract

Empirical cross-industry cross-country models are applied widely in economics, for example to investigate the determinants of economic growth or international trade. Estimation generally relies on US proxies for unobservable technological industry characteristics, for example industries' dependence on external finance or relationship-specific inputs. We examine the properties of the estimator and find that estimates can be biased towards zero (attenuated) or away from zero (amplified), depending on how technological similarity with the US covaries with other country characteristics. We also develop an alternative estimator that yields a lower bound on the true effect in cross-industry cross-country models of comparative advantage.

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  • Antonio Ciccone & Elias Papaioannou, 2010. "Estimating cross-industry cross-country models using benchmark industry characteristics," Economics Working Papers 1235, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2016.
    • Handle: RePEc:upf:upfgen:1235
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    More about this item

    Keywords

    International specialization and trade; industry growth; measurement error; financial development; institutions; regulation; factor endowments;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • F10 - International Economics - - Trade - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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