This paper explores the relevance of unknown nonlinearities for growth empirics. Recent theoretical contributions and case-study evidence suggest that nonlinearities are pervasive in the growth process. I show that the postwar data provide strong evidence in favor of generalized non-linearities. I provide two alternative mechanisms for making inference about the effects of production-function shifters on growth that do not make a priori assumptions about functional form: monotonicity tests and average derivative estimation. The results of these tests point towards a greater role for structural variables and a smaller role for policy variables than the linear model.
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Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number
2006-004.
Length: 41 pages Date of creation: Jan 2006 Date of revision:
17 May 2007 Handle: RePEc:wes:weswpa:2006-004
Note: Earlier version "Cleaning Up the Kitchen Sink: On the Consequences of the Linearity Assumption for Cross-Country Growth Empirics" available at http://repec.wesleyan.edu/pdf/frrodriguez/2006004a_rodriguez.pdf Contact details of provider: Postal: PAC 123, 238 Church Street, Middletown, CT 06459-0007 Phone: (860)685-2340 Fax: (860)685-2781 Web page: http://www.wesleyan.edu/econ/ More information through EDIRC
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