Valid instrumental variables must be relevant and exogenous. However, in practice it is difficult to find instruments that are exogenous in that they satisfy the knife-edged orthogonality condition and at the same time are strongly correlated with the endogenous regressors. In this paper we show...

We show that when instruments are nearly exogenous, the two stage least squares t-statistic unpredictably over-rejects or under-rejects the null hypothesis that the endogenous regressor is insignificant and Anderson-Rubin test over-rejects the null. We prove that in the limit these tests are no...

This paper estimates the effect of institutions on economic performance using cross-city data from China. We argue that China’s ongoing reforms are part of a long and circuitous historical transition from antiquity to modernity, which started about 150 years ago. Learning from Western...

It is well known that the standard Lagrange multiplier (LM) test loses its local optimality when the true non-null model is not correctly specified. In this paper, we derive a score test robust to local and distributional misspecifications for spatial error autocorrelation and spatial lag...

We measure the correlations between two cities’ real GDP growth rates (a measure of business cycle correlations) to capture the degree of segmentation across China’s provincial and regional borders. This type of segmentation can be caused by local protectionism as well as other...

We show that independently repeated cross-sectional data can reduce the asymptotic bias when instruments are weakly correlated to the endogenous variables. When both N and T go to infinite, we can obtain consistent estimators even if instruments are weak.

This paper models the return series of USD/CNY exchange rate by considering the conditional mean and conditional volatility simultaneously. An index type functional-coefficient model is adopted to model the conditional mean part and a GARCH type model with a policy dummy variable is applied to...

Whether natural resources boost or deter economic development remains an open question in the literature. Papyrakis and Gerlagh (2007) found a significant negative association between economic growth and resource abundance at a U.S.-state level. They demonstrated that resource abundance crowds...

This paper studies the resource curse phenomenon in China. The “resource curse†is an important claim that the resource-abundant economies grow at a slower pace than the resource-scarce economies do. There are many recent studies that analyze the resource curse phenomenon theoretically...