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Thresholds and Context Dependence in Growth

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Author Info
Atish R. Ghosh
Holger Wolf

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Abstract

Is there a single recipe for fast growth? Much of the recent cross-section empirical growth literature implicitly assumes there is. Yet both development and growth theory as well as casual empiricism suggest pervasive non-linearities in the growth process. Low inflation may grease the wheels of commerce' while high inflation may arrest them, secondary education may be crucial for promoting growth in open economies, but be largely ineffective in war-ravaged countries, etc. Such threshold effects and context dependence are difficult to capture in standard multivariate regressions, but are readily identified by classification tree analysis, undertaken here. Our results suggest that both types of non-linearities are indeed pervasive. The findings go some way towards explaining the limited robustness of cross-country growth regressions, and argue against the existence of a universal growth recipe.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6480.

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Date of creation: Mar 1998
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Handle: RePEc:nbr:nberwo:6480

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  1. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April. [Downloadable!] (restricted)
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  2. Levine, Ross, 1990. "Stock markets, growth, and policy," Policy Research Working Paper Series 484, The World Bank. [Downloadable!]
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  3. Levine, Ross & Renelt, David, 1991. "A sensitivity analysis of cross-country growth regressions," Policy Research Working Paper Series 609, The World Bank. [Downloadable!]
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  4. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-1), pages 1-118. [Downloadable!]
  5. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October. [Downloadable!] (restricted)
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  6. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
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  7. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  8. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  9. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542. [Downloadable!]
  10. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
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  1. Christine Sauer & Kishore Gawande & Geng Li, 2003. "Big push industrialization: some empirical evidence for East Asia and Eastern Europe," Economics Bulletin, Economics Bulletin, vol. 15(9), pages 1-7. [Downloadable!]
  2. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Hermes, Niels & Lensink, Robert, 2001. "Fiscal Policy and Private Investment in Less Developed Countries," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  4. Pritchett, Lant, 1998. "Patterns of economic growth : hills, plateaus, mountains, and plains," Policy Research Working Paper Series 1947, The World Bank. [Downloadable!]
  5. Montfort Mlachila & Rupa Duttagupta, 2008. "What is Really Good for Long-Term Growth? Lessons from a Binary ClassificationTree (BCT) Approach," IMF Working Papers 08/263, International Monetary Fund. [Downloadable!]
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