Growth regressions over 3-year periods; regressors in average or year values?
Asked Feb 13, 2017, 02:22 PM
Say that I want to estimate a growth regression basically similar to the Augmented Solow Model one, except my dependent variable is not Y/L, but it's the average GDP growth over a 3-year period. As my independent variables, I'd take GDP at the beginning of the period and then average values of savings rate, human capital, etc... over the period. However, I've seen it done taking savings rate and such values for the last year of the period. So, it turns out something lie:
Avg Growth 2010-2012 = GDP 2010 + Sav Rate 2012 + Hum K 2012 etc...
When I estimate it, the coefficients are correct and significant, however I cannot understand if it's right. I'd understand taking all independent variables in first year values, or taking the rates as averages over the period, but I can't see why it would be correct to base the growth of the period over the last year's value.
Can somebody shed some light on this please? Could it just be a mistake?