Institutions and growth: evidence from estimation methods robust to weak instruments

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Abstract:

This article focuses on the empirical approach proposed by Hall and Jones (1999) to estimate the effect of what they call ‘social infrastructure’ on productivity across countries. We consider the issue of weak identification in their linear instrumental variables model. The evidence obtained from partially robust estimators, such as the k-class and jackknife estimators, is interpreted on the basis of Monte Carlo studies. Our findings suggest that using certain k-class estimators allows exclusive reliance on the linguistic variables to instrument for institutional quality despite their low correlation with the endogenous regressor in question.

Keywords: C15; O40; growth; institutions; robust estimators; weak instruments

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2011.633892

Affiliations: School of Economics, Australian School of Business,The University of New South Wales, Sydney,NSW 2052, Australia

Publication date: May 1, 2013

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