for equation 3 is Z = { Z 1 , Z 2 , Z 1 x Z 2 }. 6 Results Table 3 shows the estimated coefficients for our main equation (2) , where changes in the (log) share of undernourished are regressed on economic growth, changes in food inflation, on (log) per capita social protection expenditure and initial conditions of undernourishment. Column (1) shows the simple first differences (FD) estimates, while column (2) has the results for the first difference instrumental variables (FD-IV) estimator. TABLE 3: Estimation results of main equation: PoU
-hand side variables. Since the agriculture share (agr) and the human capital indicator (school) are based on lagged GDP. agricultural production, schooling, and population growth, the most plausible candidate for this type of correlation is normalized PPP-GDP (gdp) . 24 To address these problems, we proceeded in two steps. First, we performed standard Hausman tests 25 based on estimating equation (19) in first differences, that is, comparing the plain OLS FD estimates of equation (19) with FD estimates using lagged right-hand side variables as instruments. Lagged
equilibrium exchange rate appreciates. If the market exchange rate follows suit and overshoots, this could result in an increase in dollar wages over and above the increase which corresponds to the increase in PPP-GDP, leading to a positive correlation between PPP-GDP and the error term. To address this problem, we performed standard Hausman tests 19 based on estimating (19) in first differences, i.e. comparing the plain OLS FD estimates of (19) with FD estimates using lagged right hand side variables as instruments. Lagged endogenous variables are clearly less than