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Full-Text Articles in Economics
Non-Linearity Induced Weak Instrumentation, Ioannis Kasparis, Peter C.B. Phillips, Tassos Magdalinos
Non-Linearity Induced Weak Instrumentation, Ioannis Kasparis, Peter C.B. Phillips, Tassos Magdalinos
Cowles Foundation Discussion Papers
In regressions involving integrable functions we examine the limit properties of IV estimators that utilise integrable transformations of lagged regressors as instruments. The regressors can be either I(0) or nearly integrated (NI) processes. We show that this kind of nonlinearity in the regression function can significantly affect the relevance of the instruments. In particular, such instruments become weak when the signal of the regressor is strong, as it is in the NI case. Instruments based on integrable functions of lagged NI regressors display long range dependence and so remain relevant even at long lags, continuing to contribute to variance reduction …
Income Inequality And Economic Incentives: Is There An Equity-Efficiency Tradeoff?, Lonnie K. Stevans
Income Inequality And Economic Incentives: Is There An Equity-Efficiency Tradeoff?, Lonnie K. Stevans
Lonnie K. Stevans
What is the basis and direction of relationship between income inequality and economic growth? The equity versus efficiency dictum which predicts a positive relationship between inequality, capital formation, and real GDP growth—emphasizes the importance of economic incentives. Subsequently, this was challenged by the incomplete markets and political outcomes theories, because of increasing empirical evidence of an inverse relationship between income inequality and economic growth. In this paper, a further explanation of the basis and nature of the inequality–capital–growth relationship is presented, which emphasizes the divergence between savings and investment. For the United States, over the period 1970–2006, we have found …