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Are there any robust determinants of growth in Europe? A Bayesian Model Averaging approach

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  • Sara D'Andrea

Abstract

Quantitative growth economists often have to deal with model uncertainty (Barro et al. (2003)) and the issue of open-endedness of theories (Brock and Durlauf (2001)). Bayesian Model Averaging (BMA) is the best statistical tool to evaluate the variables to include in a growth regression. This work aims to investigate the robustness of the determinants of growth in Europe from 2002 to 2019. Our dataset is composed of 70 explanatory variables for 19 European countries. We compare different BMA estimates by combining 2 model priors with 5 coefficient priors and we find that no variable is robust to all our specifications. Our results support neoclassical growth theories, as the initial level of GDP per capita and savings are robust determinants of growth. Other robust determinants include the share of manufacturing in GDP, demography, public accounts, wage and labor contract regulation, and fixed capital accumulation.

Suggested Citation

  • Sara D'Andrea, 2022. "Are there any robust determinants of growth in Europe? A Bayesian Model Averaging approach," International Economics, CEPII research center, issue 171, pages 143-173.
    • Handle: RePEc:cii:cepiie:2022-q3-171-9
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    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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