GMM Estimator: An Application to Intraindustry Trade

Table 5

Determinants of vertical intraindustry trade.

Variables	GMM system	t-statistics	Significance	Expected sign
LogVIITt−1	0.32	(15.63)	***	(+)
LogDGDP	0.19	(4.18)	***	(+)
LogEP	0.01	(1.78)	*	(+)
LogDIM	0.55	(5.13)	***	(+)
LogDIST	−0.44	(−4.25)	***	(−)
C	0.24	(0.69)
Ar(2)	0.39 [0.70]
Sargan Test	21.14 [1.00]
Observations	267

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, 5 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 𝑋² under the null of the instruments’ validity (with the two-step estimator).