Department of Economics and Business - Universitat Pompeu Fabra

Title:: Estimating cross-industry cross-country models using benchmark industry characteristics
Authors:: Antonio Ciccone and Elias Papaioannou
Date:: September 2010 (Revised: June 2016)
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.
Keywords:: International specialization and trade, industry growth, measurement error, financial development, institutions, regulation, factor endowments
JEL codes:: G30, F10, O40
Area of Research:: Macroeconomics and International Economics

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