Fig. 5
From: The role of innovation-led profits in the development of an international financial centre
Source: Zhang et al. (2009)
A very misspecified econometric study finds evidence of a “Guangdong effect”. The figure shows the coefficients for regressions trying to explain Hong Kong’s GDP per capita growth rate and general productivity (what economists call "total factor productivity" or TFP). The figure show s trade with the Mainland, trade with Guangdong, and manufacturing’s share of Hong Kong’s GDP as explanatory variables. We also show the misleading percent of variation the model explains (know n to economists as the model’s R-squared). The model’s results are useless, as the authors failed to control for other factors which affect GDP growth (like labour used), they don’t take into account that GDP growth affects trade as much as trade affects GDP growth (called "endogeneity bias") and other problems