Research Article

GMM Estimator: An Application to Intraindustry Trade

Table 3

Determinants of intraindustry trade.

VariablesGMM systemt-statisticsSignificance Expected sign

LogIITt−10.10(6.25) *** (+)
LogDGDP0.29(3.55) *** (−)
LogEP0.38(10.49) *** (−)
LogDIM0.21(3.09) *** (+)
LogDIST−1.53(−3.09) *** (−)
C2.59(1.69) *
Ar(2)−0.69 [0.49]
Sargan Test20.96 [1.00]
Observations289

The null hypothesis that each coefficient is equal to zero is tested using one-step robust standard error. 𝑡 -statistics (heteroskedasticity corrected) are in round brackets. 𝑃 values are in square brackets; ***/*statistically significant at the 1 percent and 10 percent levels. Ar(2) is tests for second-order serial correlation in the first-differenced residuals, asymptotically distributed as 𝑁 (0,1) under the null hypothesis of no serial correlation (based on the efficient two-step GMM estimator). The Sargan test addresses the overidentifying restrictions, asymptotically distributed 𝑋 2 under the null of the instruments’ validity (with the two-step estimator).