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Investment ratio in growth equations

Rao, Bhaskara B. and Singh, Rup and Gounder, Neelesh N. (2007) Investment ratio in growth equations. Applied Economics Letters, 14 (8). pp. 565-568. ISSN 1350-4851

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In the cross-country and time series studies on the determinants of the growth rate, capital stock is often proxied with the investment ratio due to lack of reliable data. While investment ratio may give good results with OLS, their robustness is doubtful. In addition there are other problems: (a) investment ratio may be a good proxy for the change in capital stock, but combining it with the level of employment to estimate a production function leads to misspecification bias; (b) it is not possible to impose any valid constraints on the coefficients of these variables and (c) if instrument variables are used to minimize any endogenous variable bias, the equation with the investment ratio seems to be fragile.

Item Type: Journal Article
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Divisions: Faculty of Business and Economics (FBE) > School of Economics
Depositing User: Ms Mereoni Camailakeba
Date Deposited: 19 Jan 2007 23:48
Last Modified: 17 Jul 2012 08:24

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