Work

Estimating Cross-Industry Cross-Country Interaction Models Using Benchmark Industry Characteristics

Year: 2022

Type: article

Abstract: Cross-industry cross-country models are used to address a wide array of questions in economics. They do so by analysing how the economic performance of industries in different countries depends on an interaction effect between industry and country characteristics. As the relevant industry characteristics are unobservable in most countries, they are approximated by industry characteristics in a benchmark country. We show that this approach generally yields biased estimates of the industry–country interaction effect. The sign of the bias depends on whether or not technologically similar countries tend to be similar in other country characteristics. We propose an alternative estimation approach.

Source: The Economic Journal

DOI: 10.1093/ej/ueac047

Authors: Antonio Ciccone, Elias Papaioannou

Institutions: University of Mannheim, Centre for Economic Policy Research, London Business School

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Deutsche Forschungsgemeinschaft, Banco Bilbao Vizcaya Argentaria

Awards: G3023023833, G5060839972