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Robust Growth Determinants

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  • Doppelhofer, Gernot

    ()
    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Weeks, Melvyn

    ()
    (University of Cambridge)

Abstract

This paper investigates the robustness of determinants of economic growth in the presence of model uncertainty, parameter heterogeneity and outliers. The robust model averaging approach introduced in the paper uses a flexible and parsi- monious mixture modeling that allows for fat-tailed errors compared to the normal benchmark case. Applying robust model averaging to growth determinants, the paper finds that eight out of eighteen variables found to be significantly related to economic growth by Sala-i-Martin et al. (2004) are sensitive to deviations from benchmark model averaging. For example, the GDP shares of mining or government consumption, are no longer robust or economically significant once deviations from the normal benchmark assumptions are allowed. The paper identifies outlying observations { most notably Botswana { in explaining economic growth in a cross-section of countries.

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Bibliographic Info

Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 3/2011.

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Length: 40 pages
Date of creation: 07 Feb 2011
Date of revision:
Handle: RePEc:hhs:nhheco:2011_003

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Keywords: Determinants of Economic Growth; Robust Model Averaging; Heteroscedasticity; Outliers; Mixture models.;

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