Log(DSAi) = α0 + α1Log(EIi) + α2Log(PFi)
Log(DSAi) = β0 + β1Log(COSTi) + β2Log(QUALITYi) + β3Log(FTFi)
In order to confirm the validity of the selection of functional form by theoretical
considerations, the RESET tests and the White hetero-skedasticity tests were carried out.
With regard to the political pressure model, the results of the RESET tests showed that
the possibility of existing errors was highly rejected. Other functional forms such as
linear and semi-log type were also tested. There was no other form which shows
remarkably better performance than double-log form. The functional form adopted by
theoretical considerations was empirically confirmed to be valid. The results of the
White tests showed that, in every year except for 1980, the possibility of existing
hetero-skedasticity was rejected. This fact also indirectly suggests the validity of the
selection of functional form. As for 1980, the result relating to t-statistics using the
White hetero-skedasticity consistent covariance was also juxtaposed with the results
from normal estimation13.
With regard to the regression related to bureaucrats’ seemingly discretionary
allocation formula14, the results of the White tests showed that the possibility of existing
hetero-skedasticity was significantly suspected in 1984 and 1988. Consequently, as
similarly as the case of the political pressure model, the results of these two years
relating to t-statistics using White hetero-skedasticity consistent covariance were shown
to be parallel.
Estimation method and data
13 According to Davidson and McKinnon (1993), results of this estimation method
become unstable when the number of sample is not so large. In that case, adoption of
this method instead of conventional estimation does not necessarily warrants us to
improvement of the estimation. Hence, here, both results were shown,
14 To discuss absolute values of the results of the RESET tests relating to this regression
is inherently meaningless because not all conceivable factors are incorporated into the
regression.
15