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Multiple Testing Techniques in Growth Econometrics

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Author Info
Deckers, Thomas
Hanck, Christoph
Abstract

This paper discusses two longstanding questions in growth econometrics which involve multiple hypothesis testing. In cross sectional GDP growth regressions many variables are simultaneously tested for significance. Similarly, when investigating pairwise convergence of output for $n$ countries, $n(n-1)/2$ tests are performed. We propose to control the false discovery rate (FDR) so as not to erroneously declare variables significant in these multiple testing situations only because of the large number of tests performed. Doing so, we provide a simple new way to robustly select variables in economic growth models. We find that few other variables beyond the initial GDP level are needed to explain growth. We also show that convergence of per capita output using a time series definition with the necessary condition of no unit root in the log per-capita output gap of two economies does not appear to hold

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17843.

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Date of creation: 10 Oct 2009
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Handle: RePEc:pra:mprapa:17843

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Related research
Keywords: Growth Empirics; Multiple Testing; Convergence; Bootstrap;

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Find related papers by JEL classification:
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing

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  11. Hashem Pesaran, M., 2007. "A pair-wise approach to testing for output and growth convergence," Journal of Econometrics, Elsevier, vol. 138(1), pages 312-355, May. [Downloadable!] (restricted)
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  14. Leeb, Hannes & Pötscher, Benedikt M., 2005. "Can One Estimate the Unconditional Distribution of Post-Model-Selection Estimators ?," MPRA Paper 72, University Library of Munich, Germany, revised Feb 2007. [Downloadable!]
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  17. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May. [Downloadable!] (restricted)
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  19. Leeb, Hannes & P tscher, Benedikt M., 2008. "Can One Estimate The Unconditional Distribution Of Post-Model-Selection Estimators?," Econometric Theory, Cambridge University Press, vol. 24(02), pages 338-376, April. [Downloadable!]
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