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Thresholds and Context Dependence in Growth

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  • Atish R. Ghosh
  • Holger Wolf

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. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers, DELTA (Ecole normale supérieure) 90-12, DELTA (Ecole normale supérieure).
  2. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  3. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 407-37, May.
  4. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, Elsevier, vol. 49(1), pages 33-59, April.
  5. 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(1, 25th A), pages 1-118.
  6. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
  7. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 942-63, September.
  8. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  9. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 39(1), pages 31-57, July.
  10. Levine, Ross, 1990. "Stock markets, growth, and policy," Policy Research Working Paper Series 484, The World Bank.
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Cited by:
  1. Pritchett, Lant, 1998. "Patterns of economic growth : hills, plateaus, mountains, and plains," Policy Research Working Paper Series 1947, The World Bank.
  2. repec:cuf:journl:y:2013:v:14:i:3:kaminsky is not listed on IDEAS
  3. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
  4. Rupa Duttagupta & Montfort Mlachila, 2008. "What is Really Good for Long-Term Growth? Lessons from a Binary ClassificationTree (BCT) Approach," IMF Working Papers 08/263, International Monetary Fund.
  5. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 25(3), pages 503-527, April.
  6. Klump, Rainer, 2003. "Inflation, factor substitution and growth," Working Paper Series, European Central Bank 0280, European Central Bank.
  7. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 79(244), pages 112-135, 03.
  8. Christine Sauer & Geng Li & Kishore Gawande, 2003. "Big push industrialization: some empirical evidence for East Asia and Eastern Europe," Economics Bulletin, AccessEcon, vol. 15(9), pages 1-7.
  9. repec:ebl:ecbull:v:15:y:2003:i:9:p:1-7 is not listed on IDEAS

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