Dear All. My research topic is Financial development, economic growth and FDI. What is the difference between the initial gdp and the lagged gdp variable found in the panel data economic growth models in the literature? They both have the same meaning.
for example
1) Gdp = Gdp (t -1) + FDI + Controls variable
2) Gdp = Gdp (initial) + FDI + Controls variable
The following paper discusses the instruments in the difference and system generalized method of moments (GMM) estimators. Hope this paper helps you.
David Roodman (2009). PRACTITIONERS’ CORNER: A Note on the Theme of Too Many Instruments. OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 71, 1.
Each country's initial GDP is time-invariant, therefore initial GDP is perfectly colinear with any other time-invariant variable. e.g. country fixed effects. This prevents FE estimation and may cause other econometric problems. The (neo-classical) growth model that implies a negative relationship between growth and initial GDP also implies a negative relationship (with a different coefficient) between growth and lagged GDP. Lagged GDP can therefore be used if the econometric problems associated with initial GDP are a concern.
- Badges
- Science topic
- Similar topics
- Economics