Mastering Panel Metrics: Causal Impact of Democracy on Growth
Name
pandp.20191071.pdf
Description
Published version
Size
495.42 KB
Format
Adobe PDF
Checksum (MD5)
064f82152106f6ad7250a48bf0e3aeb6
Author(s)
Chen, Shuowen
Chernozhukov, Victor V
Fernández-Val, Iván
Date Issued
May 2019
Journal
AEA Papers and Proceedings
Publisher
American Economic Association
Citation
Chen, Shuowen et al. "Mastering Panel Metrics: Causal Impact of Democracy on Growth." AEA Papers and Proceedings 109 (May 2019): 77-82 © 2018 The Authors
Version
Final published version
Abstract
The relationship between democracy and economic growth is of long standing interest. We revisit the panel data analysis of this relationship by Acemoglu et al. (2019) using state of the art econometric methods. We argue that this and lots of other panel data settings in economics are in fact high-dimensional, resulting in principal estimators—the fixed effects (FE) and Arellano-Bond (AB) estimators—to be biased to the degree that invalidates statistical inference. We can however remove these biases by using simple analytical and sample-splitting methods, and thereby restore valid statistical inference. We find that the debiased FE and AB estimators produce substantially higher estimates of the long-run effect of democracy on growth, providing even stronger support for the key hypothesis in Acemoglu et al. (2019). Given the ubiquitous nature of panel data, we conclude that the use of debiased panel data estimators should substantially improve the quality of empirical inference in economics.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
http://dx.doi.org/10.1257/pandp.20191071
