I estimate the Cobb-Douglas production function in a static form as follows:
GDP per capita = Capital formation per capita + energy consumption per capita + inflation + trade openness + financial development
My sample is 13 years for 27 countries.
- I am using the fixed effect regression with robust standard errors and panel corrected standard errors with fixed effects. The two regressions give the expected results of my variable of interest (i.e., financial development). However, since the energy consumption variable is endogenous (i.e., due to the reverse causality), I should use a model that corrects the potential biases of this endogeneity. As I mentioned in #424, I can use the two-step GMM estimator to control for the endogeneity. Nevertheless, the financial development (my main variable) in this regression is insignificant/or counterintuitive.
- Given my sample size and the static specification, which estimator would be the most relevant to control for the endogeneity?
-
Login or Register
- Log in with
Leave a comment: