Abstract After the seminal work of Nickell (1981), a vast literature demonstrates the inconsistency of ‘conditional convergence’ estimator in income-based dynamic panel models with fixed effects when the time horizon (T) is short but the sample of countries (N) is large. Less attention is given to the economic root of inconsistency of the fixed effects estimator when T is also large. Using a variant of the Ramsey growth model with long-run adjustment cost of capital, we demonstrate that the fixed effects estimator of such models could be inconsistent when T is large. This inconsistency arises because of the long-run adjustment cost of capital which gives rise to a negative moving average coefficient in the error term. Income convergence will be thus overestimated. We theoretically characterize the order of this inconsistency. Our Monte Carlo simulation demonstrates that the size of the bias is substantial and it is greater in economies with higher capital adjustment costs. We show that the use of instrumental variables that take into account the presence of the negative moving average term in the error will overcome this bias.

中文翻译：

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具有固定影响的基于收入的动态面板模型中的资本调整成本和不一致

摘要在尼克尔（Nickell（1981））的开创性工作之后，大量文献证明了当时间范围（T）短而国家样本（N）短时，具有固定效应的基于收益的动态面板模型中“条件收敛”估计的不一致。大。当T也很大时，较少关注固定效应估计量不一致的经济根源。使用具有长期资本调整成本的Ramsey增长模型的变体，我们证明了当T较大时，此类模型的固定效应估计值可能会不一致。之所以出现这种不一致，是因为长期的资本调整成本导致了误差项中的负移动平均系数。因此，收入趋同将被高估。从理论上讲，我们描述了这种不一致的顺序。我们的蒙特卡洛模拟表明，偏差的规模很大，在资本调整成本较高的经济体中，偏差较大。我们表明，考虑到误差中存在负移动平均项的工具变量的使用将克服此偏差。