Estimates of technology and convergence: Simulation results

Vol: 
07/2006
Author name: 
Wells G
Stengos T
Year: 
2006
Month: 
February
Abstract: 

Using a Solow-Swan model with a stochastic saving rate and stochastic productivity we analyse the distributions of parameter estimates that emerge under various choices of technology, and of the dimension of the panel on which cross-section regressions are based. There are distinct asymmetries that characterize these distributions. These asymmetries become more pronounced when the effects of a near-unit root in the productivity shock become magnified over a longer time horizon and when the underlying production function is not Cobb-Douglas. Consequently, relying on traditional econometric transformations of these parameter estimates based on symmetric distributions, such as t-ratios, will be quite misleading if one tries to assess technology parameters and B-convergence.

Publication file: 

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