Note(s): (***) significant at the 1% level; z-statistics are in parentheses. We use as valid instruments for the endogenous size of population-level in city i the natural logarithm of per capita income level (ln RDPC91) in 1991, the natural logarithm of population-level in neighboring cities in 1991 (ln WPOP91), and the IDHM level in neighboring cities in 1991 (WIDHM91). The Sargan test statistic has null the validity of instruments. The Wu-Hausman statistic tests the null of the absence of correlation between the covariate and the error term (exogeneity). The weak instruments statistic tests the null of the absence of correlation between the instruments and the endogenous variable. In the LS and standard IV methods, we use robust standard errors of Cribari-Neto (2004) that present better performance, especially in the presence of influential observations. We calculate the 95% bootstrap confidence interval based on 10,000 resamples using the IV estimator and the same set of valid instruments employed for point estimates. The values in italics refer to the essential empirical findings

Source(s): Author’s elaboration from data