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Testing the Stability of a Production Function with Urbanization as a Shift Factor
Author(s) -
McCoskey Suzanne,
Kao Chihwa
Publication year - 1999
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.0610s1671
Subject(s) - production (economics) , urbanization , stability (learning theory) , function (biology) , factor (programming language) , economics , environmental science , econometrics , macroeconomics , computer science , economic growth , biology , machine learning , evolutionary biology , programming language
Urban economists have long sought to explain the relationship between urbanization levels and output. In this paper we revisit this question and test the long‐run stability of a production function including urbanization using non‐stationary panel data techniques. Our results show that a long‐run relationship between urbanization, output per worker and capital per worker cannot be rejected for either our sample of 30 developing countries or our sample of 22 developed countries. We do find, however, that the sign and magnitude of the impact of urbanization varies considerably across the countries. In addition, we estimate the long‐run average effects on GDPW of urbanization and capital. These results offer new insights and potential for dynamic urban models rather than the simple cross‐section approach.