Table 2 Two-step GMM estimates of growth...

Table 2

Two-step GMM estimates of growth and equalization for China and India, 1985 to 2005

Variables	China (1985–2005)		India (1985–2005)
Variables	Growth equation	Equalization equation	Growth equation	Equalization equation
Growth rate in real GRP per capita	–	−0.003 (0.003)	–	0.002 (0.002)
Index of horizontal fiscal equalization	0.73 (1.48)	–	−9.02 (14.61)	–
Index of fiscal decentralization	−1.01* (0.59)	0.17*** (0.06)	−44.12*** (10.69)	0.24** (0.12)
Index of fiscal decentralization-squared	0.08*** (0.03)	−0.01*** (0.003)	2.21*** (0.83)	−0.03*** (0.009)
Growth rate of fixed asset investment	0.15*** (0.008)	–	9.80*** (2.04)	–
Growth rate of employment	−2.05 (3.42)	–	−45.66*** (9.03)	–
Government size	−0.03 (0.04)	−0.02*** (0.002)	0.09 (0.31)	−0.004 (0.003)
Central government development spending	0.02 (0.03)	−0.002* (0.001)	−0.29 (0.34)	0.007*** (0.002)
Share of missing women	–	−0.02 (0.02)	–	−0.01 (0.02)
Rate of fiscal self-reliance	–	0.002* (0.001)	–	−0.004** (0.002)
Fiscal regime (=1 if year ≥ 1994; else 0)	3.23*** (0.87)	−0.16*** (0.05)	–	–
Fiscal regime (=1 if year ≥ 1991; else 0)	–	–	−0.14 (3.61)	0.09*** (0.03)
Control variables for natural disasters	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes
Province (state) fixed effects	Yes	Yes	Yes	Yes
Number of observations	599	599	415	415
Weak-identification test	19.67 (9.37)^a	13.47 (9.01)^a	11.82 (7.77)^a	5.14 (6.61)^a
Sargan statistic	4.48 p-value = 0.61	0.22 p-value = 0.64	0.39 p-value = 0.94	2.19 p-value = 0.34

Variables	China (1985–2005)		India (1985–2005)
Variables	Growth equation	Equalization equation	Growth equation	Equalization equation
Growth rate in real GRP per capita	–	−0.003 (0.003)	–	0.002 (0.002)
Index of horizontal fiscal equalization	0.73 (1.48)	–	−9.02 (14.61)	–
Index of fiscal decentralization	−1.01* (0.59)	0.17*** (0.06)	−44.12*** (10.69)	0.24** (0.12)
Index of fiscal decentralization-squared	0.08*** (0.03)	−0.01*** (0.003)	2.21*** (0.83)	−0.03*** (0.009)
Growth rate of fixed asset investment	0.15*** (0.008)	–	9.80*** (2.04)	–
Growth rate of employment	−2.05 (3.42)	–	−45.66*** (9.03)	–
Government size	−0.03 (0.04)	−0.02*** (0.002)	0.09 (0.31)	−0.004 (0.003)
Central government development spending	0.02 (0.03)	−0.002* (0.001)	−0.29 (0.34)	0.007*** (0.002)
Share of missing women	–	−0.02 (0.02)	–	−0.01 (0.02)
Rate of fiscal self-reliance	–	0.002* (0.001)	–	−0.004** (0.002)
Fiscal regime (=1 if year ≥ 1994; else 0)	3.23*** (0.87)	−0.16*** (0.05)	–	–
Fiscal regime (=1 if year ≥ 1991; else 0)	–	–	−0.14 (3.61)	0.09*** (0.03)
Control variables for natural disasters	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes
Province (state) fixed effects	Yes	Yes	Yes	Yes
Number of observations	599	599	415	415
Weak-identification test	19.67 (9.37)^a	13.47 (9.01)^a	11.82 (7.77)^a	5.14 (6.61)^a
Sargan statistic	4.48 p-value = 0.61	0.22 p-value = 0.64	0.39 p-value = 0.94	2.19 p-value = 0.34

Note(s): Robust standard errors are provided in parentheses

*** Statistically significant at the 1% level; ** at the 5% level; and * at the 10% level

The estimated coefficients of the catastrophe dummy variables are not reported here but are available from the authors upon request

^aThe critical value for the 10% maximal IV relative bias of the Stock-Yogo (2005) weak-identification test

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