16 Nov Control Variables – Dis-aggregation Approach
In continuation of the discussion on selecting control variables. In disaggregation approach we decompose GDP into its sub components to increase number of independent variables rather than using GDP itself.
Strategy 2a: Sector-wise Disaggregation
The first type is the use of sector wise decomposition of GDP i.e. industry agriculture and services. It will help to identify the contribution of each sector. Few studies have used Industry / Agriculture to measure Industrialization as a variable. Few examples include (Kalim et al., 2019)
Strategy 2b: Income-wise Disaggregation
In income case, we can use wage income, interest income, tax revenue etc. This will cover the dimension of income effects.
Strategy 2c; Expenditrue-wise Disaggregation
Other method is use of expenditrue-wise decompose GDP which include consumption, investment, government expenditures and trade balance. Further we can extend it to per capita transformation.
Your participation and suggestions are welcomed
Kalim, R., Arshed, N., & Shaheen, S. (2019). Does Competitiveness Moderates Inclusive Growth: A Panel Study of Low-Income Countries. Competitiveness Review: An International Business Journal.