GMM Estimator: An Application to Intraindustry Trade

Table 4

Determinants of Horizontal Intraindustry Trade.

Variables	GMM system	t-statistics	Significance	Expected sign
LogHIITt−1	0.33	(21.1)	***	(+)
LogDGDP	2.06	(2.44)	*	(−)
LogEP	1.09	(3.33)	***	(−)
LogDIM	2.69	(4.19)	***	(+)
LogDIST	−1.92	(−1.79)	*	(−)
C	3.94	(0.90)
Ar(2)	2.09 [0.36]
Sargan Test	18.54 [1.00]
Observations	138

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. 𝑃values are in square brackets; ***/*statistically significant at the 1, 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 𝑋²under the null of the instruments’ validity (with the two-step estimator).