Baltagi article on productivity spillovers in China published in Journal of Applied Econometrics

May 3, 2015

Firm-Level Productivity Spillovers in China's Chemical Industry: A Spatial Hausman-Taylor Approach

Badi H. Baltagi, Peter H. Egger & Michaela Kesina

Journal of Applied Econometrics, May 2015

Badi H. Baltagi

Economics Department

Center for Policy Research

China

Journal of Applied Econometrics

Badi H. Baltagi

This paper assesses intra-sectoral spillovers in total factor productivity (TFP) across Chinese producers in the chemical industry using panel data on 12,552 firms observed over 2004-2006. The authors specify TFP as a composite of observable factors such as export market participation, foreign as well as public ownership, the extent of accumulated intangible assets, and unobservable components. They introduce spatial spillovers in TFP through contextual effects of observable variables as well as spatial dependence of the disturbances, extending the Hausman and Taylor (1981) estimator to account for spatial correlation in the error term which may be homoskedastic or heteroskedastic.