Mastering Panel Metrics: Causal Impact of Democracy on Growth
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-di...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
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American Economic Association
2019
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| Online Access: | https://hdl.handle.net/1721.1/122943 |
| _version_ | 1826188021391687680 |
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| author | Chen, Shuowen Chernozhukov, Victor V Fernández-Val, Iván |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Chen, Shuowen Chernozhukov, Victor V Fernández-Val, Iván |
| author_sort | Chen, Shuowen |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T07:53:23Z |
| format | Article |
| id | mit-1721.1/122943 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T07:53:23Z |
| publishDate | 2019 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/1229432024-06-21T13:12:03Z Mastering Panel Metrics: Causal Impact of Democracy on Growth Chen, Shuowen Chernozhukov, Victor V Fernández-Val, Iván Massachusetts Institute of Technology. Department of Economics 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. National Science Foundation (U.S.) Spanish State Research Agency (MDM-2016-0684) 2019-11-14T20:37:28Z 2019-11-14T20:37:28Z 2019-05 2019-10-22T15:58:17Z Article http://purl.org/eprint/type/JournalArticle 2574-0768 2574-0776 https://hdl.handle.net/1721.1/122943 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 en http://dx.doi.org/10.1257/pandp.20191071 AEA Papers and Proceedings 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. application/pdf American Economic Association American Economic Association |
| spellingShingle | Chen, Shuowen Chernozhukov, Victor V Fernández-Val, Iván Mastering Panel Metrics: Causal Impact of Democracy on Growth |
| title | Mastering Panel Metrics: Causal Impact of Democracy on Growth |
| title_full | Mastering Panel Metrics: Causal Impact of Democracy on Growth |
| title_fullStr | Mastering Panel Metrics: Causal Impact of Democracy on Growth |
| title_full_unstemmed | Mastering Panel Metrics: Causal Impact of Democracy on Growth |
| title_short | Mastering Panel Metrics: Causal Impact of Democracy on Growth |
| title_sort | mastering panel metrics causal impact of democracy on growth |
| url | https://hdl.handle.net/1721.1/122943 |
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