Henderson, Daniel J. and Papageorgiou, Chris and Parmeter, Christopher F. (2008): Are any growth theories linear? Why we should care about what the evidence tells us.
Download (597kB) | Preview
Recent research on macroeconomic growth has been focused on resolving several key issues, two of which, specification uncertainty of the growth process and variable uncertainty, have received much attention in the recent literature. The standard procedure has been to assume a linear growth process and then to proceed with investigating the relevant variables that determine growth across countries. However, a more appropriate approach would be to recognize that a misspecified model may lead one to conclude that a variable is relevant when in fact it is not. This paper takes a step in this direction by considering conditional variable uncertainty with full blown specification uncertainty. We use recently developed nonparametric model selection techniques to deal with nonlinearities and competing growth theories. We show how one can interpret our results and use them to motivate more intriguing specifications within the traditional studies that use Bayesian Model Averaging or other model selection criteria. We find that the inclusion of nonlinearities is necessary for determining the empirically relevant variables that dictate growth and that nonlinearities are especially important in uncovering key mechanism of the growth process.
|Item Type:||MPRA Paper|
|Original Title:||Are any growth theories linear? Why we should care about what the evidence tells us|
|Keywords:||Growth Nonlinearities, Irrelevant Variables, Least Squares Cross Validation, Bayesian Model Averaging, Parameter Heterogeneity|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C15 - Statistical Simulation Methods: General
O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
|Depositing User:||Daniel J. Henderson|
|Date Deposited:||16. May 2008 00:38|
|Last Modified:||12. May 2015 01:14|
Azariadis, C. and J. Stachurski, 2005. Poverty Traps, in P. Aghion and S.N. Duraluf, eds. Handbook of Economic Growth, Vol. 1 (Elsevier, USA).
Brock, W. and S. Durlauf, 2001. \Growth Empirics and Reality," World Bank Economic Review, 15(2): 229-272.
Ciccone, A. and M. Jarocinski, 2007. \Determinants of Economic Growth: Will Data Tell?," working paper, Universitat Pompeu Fabra.
Doppelhofer, G. and M. Weeks, (forthcoming). \Jointness of Growth Determinants," Journal of Applied Econometrics.
Durlauf, S., and P. Johnson, 1995. \Multiple Regimes and Cross Country Growth Behavior," Journal of Applied Econometrics, 10(4): 365-384.
Durlauf, S.N., P. Johnson, and J. Temple, 2005. \Growth Econometrics," in Handbook of Economic Growth, P. Aghion and S.N. Durlauf (Eds.), Amsterdam, North Holland, Volume 1A, 555-677.
Durlauf, S., A. Kourtellos, and A. Minkin, 2001. \The Local Solow Growth Model," European Economic Review, 45(4-6): 928-940.
Durlauf, S., A. Kourtellos, and C. Tan, 2008. \Are any Growth Theories Robust?" Economic Journal 118, 329-346.
Easterly, W., and R. Levine, 1997. \Africa's Growth Tragedy: Politics and Ethnic Divisions," Quarterly Journal of Economics, 112(4): 1203-1250.
 Efroymson, M.A.,1960, \Multiple Regression Analysis," in Mathematical Methods for Digital Computers, edited by A. Ralston and H. S. Wilf. Wiley, New York.
 Fernandez, C., E. Ley and M. Steel, 2001. \Model Uncertainty in Cross-Country Growth Regressions," Journal of Applied Econometrics , 16(5): 563-576.
 Galor, O. and D. Weil 2000. \Population, Technology, and Growth: From Malthusian Stagna- tion to the Demographic Transition and Beyond," American Economic Review 90, 806-829.
 Hall, P., Q. Li, and J. Racine 2007. \Nonparametric Estimation of Regression Functions in the Presence of Irrelevant Regressors," Review of Economics and Statistics 89, 784-789.
 Hendry, D. and H.-M. Krolzig, 2004. \We Ran One Regression," Oxford Bulletin of Economics and Statistics, 66(5): 799-810.
 Hoeting, J., D. Madigan, A. Raftery, and C. Volinsky, 1999. \Bayesian Model Averaging: A Tutorial," Statistical Science, 14: 382-417.
 Hoover, K., and S. Perez, 2004. \Truth and Robustness in Cross-country Growth Regressions," Oxford Bulletin of Economics and Statistics, 66(5): 765-798.
 Hsiao, C., Q. Li and J. Racine, 2007. \A Consistent Model Speci¯cation Test with Mixed Categorical and Continuous Data," Journal of Econometrics 140(2): 802-826.
 Kalaitzidakis, P., T. Mamuneas, and T. Stengos, 2000. \A Non-Linear Sensitivy Analysis of Cross Country Growth Regressions," Canadian Journal of Economics, 33(3): 604-617.
 Ketteni, E., T. P. Mamuneas, and T. Stengos (2007), \Nonlinearities in Economic Growth: A Semiparametric Approach Applied to Information Technology Data," Journal of Macroeco- nomics, 29, 555-568.
 Kourtellos, A., 2003. \Modeling Parameter Heterogeneity in Cross-Country Growth Regression Models," mimeo, University of Cyprus.
 Lavergne, P., and Q. Vuong (2000). \Nonparametric Signi¯cance Testing," Econometric Theory 16, 576-601.
 Leamer, E.E.,1978. Speci¯cation Searches: Ad Hoc Inference with Nonexperimental Data, Wi- ley, New York.
 Leamer, E.E., 1983. \Let's Take the Con Out of Econometrics," American Economic Review, 73(1): 31-43.
 Lee, K., M. Pesaran, and R. Smith, 1997. \Growth and Convergence in a Multi Country Empirical Stochastic Solow Model," Journal of Applied Econometrics, 12(4): 357-392.
 Levine, R. and D. Renelt, 1992. \A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, 82(4): 942-963.
 Ley, E. and M.F.J. Steel, 2007. \Jointness in Bayesian Variable Selection with Applications to Growth Regression," Journal of Macroeconomics 29(3): 476-493.
 Ley, E. and M.F.J. Steel, (forthcoming). \On the E®ect of Prior Assumptions in BMA with Applications to Growth Regression," Journal of Applied Econometrics.
 Li, Q., and J. Racine, 2004. \Cross-Validated Local Linear Nonparametric Regression," Sta- tistica Sinica, 14: 485-512.
 Liu, Z., and T. Stengos, 1999. \Non-Linearities in Cross Country Growth Regressions: A Semiparametric Approach," Journal of Applied Econometrics, 14(5): 527-538.
 Mamuneas, T., A. Savvides, and T. Stengos, 2006. \Economic Development and the Return to Human Capital: A Smooth Coe±cient Semiparametric Approach," Journal of Applied Econometrics, 21: 111-132.
 Masanjala, W., and C. Papageorgiou, 2004. \The Solow Model with CES Technology: Non- linearities with Parameter Heterogeneity," Journal of Applied Econometrics, 19(2): 171-201.
 Masanjala, W., and C. Papageorgiou, forthcoming. \Rough and Lonely Road to Prosperity: A Reexamination of the Sources of Growth in Africa Using Bayesian Model Averaging," Journal of Applied Econometrics .
 Massoumi, E., J. Racine, and T. Stengos, 2007. \Growth and Convergence: A Pro¯le of Distribution Dynamics and Mobility," Journal of Econometrics, 136: 483-508.
 Racine, J., and Q. Li, 2004. \Nonparametric Estimation of Regression Functions with Both Categorical and Continuous Data," Journal of Econometrics, 119: 99-130.
 Sala-i-Martin, X., 1997a. \I Just Ran Two Million Regressions," American Economic Review, 87(2): 178-183.
 Sala-i-Martin, X., 1997b. \I Just Ran Four Million Regressions," National Bureau of Economic Research Working Paper no. 6252.
 Sala-i-Martin, X., G. Doppelho®er, and R. Miller, 2004. \Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, 94(4): 813-835.
 Tan, C., 2007. \No One True Path to Development: Uncovering the Interplay Between Ge- ography, Institutions, and Ethnic Fractionalization in Economic Development," mimeo, Tufts University.
 Temple, J., 1998. \Robustness Tests of the Augmented Solow Model," Journal of Applied Econometrics, 13(4): 361-375.
 Temple, J., 1999. \The New Growth Evidence," Journal of Economic Literature, Vol. 37(1): 112-156.
 Vavona, A. and S. Schiavo (2007), \Nonparametric and Semiparametric Evidence on the Long- Run E®ects of In°ation on Growth," Economics Letters, 94, 452-458.