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A Projection Pursuit Approach to Cross Country Growth Data

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  • Andros Kourtellos

Abstract

The empirical modeling of the cross-country differences in growth behavior is undoubtedly one of the most predominant research topics in applied macro-econometrics. However, despite the vast research effort it seems that there are only a few firm conclusions on the sources of cross-country differences. Unlike the bulk of the literature which focuses on linear parametric models this paper studies a semi-parametric way of modelling. In particular, it employs projection pursuit regression (PPR) to model the mean regression function of the growth process by a sum of unknown ridge functions (functions of linear combinations of covariates). PPR model was proposed by Friedman and Stuetzle (1981) to approximate high dimensional functions by simpler functions that operate in low dimensional spaces-typically one-dimensional. My findings identify non-linear relationships among the basic Solow-type variables. In particular, initial income and human capital affect growth in a very nonlinear way. Furthermore, there is evidence of interaction effects between human capital and initial income as well as between initial income and population growth rates. The findings suggest the presence of two steady-state equilibria that classify countries into two groups with different convergence characteristics.

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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/0213.pdf
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Bibliographic Info

Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 0213.

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Length: 26 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:ucy:cypeua:0213

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Web page: http://www.econ.ucy.ac.cy

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References

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  1. Brock,W.A. & Durlauf,S.N., 2000. "Growth economics and reality," Working papers 24, Wisconsin Madison - Social Systems.
  2. repec:att:wimass:9419 is not listed on IDEAS
  3. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
  4. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  5. Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," Working Papers 98-01-012, Santa Fe Institute.
  6. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
  7. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173.
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Cited by:
  1. Durlauf, Steven N. & Kourtellos, Andros & Minkin, Artur, 2001. "The local Solow growth model," European Economic Review, Elsevier, vol. 45(4-6), pages 928-940, May.
  2. Kerekes, Monika, 2009. "Growth miracles and failures in a Markov switching classification model of growth," Discussion Papers 2009/11, Free University Berlin, School of Business & Economics.
  3. Oya Pinar Ardic, 2006. "The Gap Between the Rich and the Poor: Patterns of Heterogenity in the Cross-Country Data," Working Papers 2006/01, Bogazici University, Department of Economics.
  4. Morier, Bruno & Teles, Vladimir Kuhl, 2011. "A time-varying markov-switching model for economic growth," Textos para discussão 305, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  5. Cohen-Cole,E.B. & Durlauf,S.N. & Rondina,G., 2005. "Nonlinearities in growth : from evidence to policy," Working papers 9, Wisconsin Madison - Social Systems.
  6. Durlauf,S.N., 2003. "The convergence hypothesis after 10 years," Working papers 6, Wisconsin Madison - Social Systems.

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