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I estimated growth regressions for several EU countries. In each of them, the sign of "initial GDP"'s coefficient is statistically significant but positive, which contradicts growth theory as well as most of other published papers on this topic. I tried to change the variables, the period, etc. but it remains positive.

I can't find any explanation for this result in the literature, which would imply that there is no growth convergence among European countries.

Did anybody already face this problem? How did you solve this? I can't find the source of this problem. Personally, I replaced "initial GDP" by "lagged (one period) GDP" but it would be better if I could keep "initial GDP" among the explanatory variables.

Thank you so much for your help

Kind regards

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As pirapat mentioned, have you checked for serial correlation? Can you try using other, similar variables? Have you made sure that things are all in the correct units? Just some simple suggestions. – majmun Jan 5 at 23:06

I think that the lagged period is too short. So, your model possibly had serial-correlation, that means convergence effect can not express.

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This does not provide an answer to the question. To critique or request clarification from an author, leave a comment below their post - you can always comment on your own posts, and once you have sufficient reputation you will be able to comment on any post. - From Review – optimal control Dec 7 '15 at 13:17
    
Thank you for your suggestion pirapat. But the variable "initial GDP" is a constant. There is no lag. So, I can not increase the lagged period. – user6171 Dec 27 '15 at 15:16

It's really difficult to give a satisfactory answer without having the data at hand. I would do two things:

1/ Check carefully the data and computation of growth rates. By experience, it happens that some "particular" result is the consequence of data or computation issues. You may for example observe any issue by plotting your growth rates and initial GPDs with the name of the countries.

2/ Use your data but exactly the same period, same countries and same methodology than the literature and check if you still find a contradictory result. Then, you can mix: use the same source of data, same countries, same period but your methodology, etc...

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