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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., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  2. Levine, Ross, 1990. "Stock markets, growth, and policy," Policy Research Working Paper Series 484, The World Bank.
  3. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  4. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  5. Antonio Ciccone & Kiminori Matsuyama, 1995. "Start-up costs and pecuniary externalities as barriers to economic development," Economics Working Papers 142, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  7. 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.
  8. Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.
  9. 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.
  10. 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.
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Cited by:
  1. Kaminsky, Graciela L., 2006. "Currency crises: Are they all the same?," Journal of International Money and Finance, Elsevier, vol. 25(3), pages 503-527, April.
  2. Mark Rogers, 2003. "A Survey of Economic Growth," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 112-135, 03.
  3. repec:ebl:ecbull:v:15:y:2003:i:9:p:1-7 is not listed on IDEAS
  4. Pritchett, Lant, 1998. "Patterns of economic growth : hills, plateaus, mountains, and plains," Policy Research Working Paper Series 1947, The World Bank.
  5. Klump, Rainer, 2003. "Inflation, factor substitution and growth," Working Paper Series 0280, European Central Bank.
  6. 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.
  7. Graciela L. Kaminsky, 2003. "Varieties of Currency Crises," NBER Working Papers 10193, National Bureau of Economic Research, Inc.
  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:cuf:journl:y:2013:v:14:i:3:kaminsky is not listed on IDEAS

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