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The Determinants of Long-Run Economic Growth: A Conceptually and Computationally Simple Approach

Listed author(s):
  • Jaroslava Hlouskova
  • Martin Wagner

In this paper we use principal components augmented regressions (PCARs), partly in conjunction with model averaging, to determine the variables relevant for economic growth. The use of PCARs allows to effectively tackle two major problems that the empirical growth literature faces: (i) the uncertainty about the relevance of variables and (ii) the availability of data sets with the number of variables of the same order as the number of observations. The use of PCARs furthermore implies that the computational cost is, compared to standard approaches used in the literature, negligible. The proposed methodology is applied to three data sets, including the Salai-Martin, Doppelhofer, and Miller (2004) and Fernandez, Ley, and Steel (2001) data as well as an extended version of the former. Key economic variables are found to be significantly related to economic growth, which demonstrates the relevance of the proposed methodology for empirical growth research.

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Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 149 (2013)
Issue (Month): IV (December)
Pages: 445-492

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Handle: RePEc:ses:arsjes:2013-iv-2
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  1. Koop, Gary & Leon-Gonzalez, Roberto & Strachan, Rodney, 2012. "Bayesian model averaging in the instrumental variable regression model," Journal of Econometrics, Elsevier, vol. 171(2), pages 237-250.
  2. Kevin D. Hoover & Stephen J. Perez, 2004. "Truth and Robustness in Cross-country Growth Regressions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 765-798, December.
  3. StevenN. Durlauf & Andros Kourtellos & ChihMing Tan, 2008. "Are Any Growth Theories Robust?," Economic Journal, Royal Economic Society, vol. 118(527), pages 329-346, 03.
  4. Carmen Fernandez & Eduardo Ley & Mark F. J. Steel, 2001. "Model uncertainty in cross-country growth regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 563-576.
  5. Ulrike Schneider & Martin Wagner, 2012. "Catching Growth Determinants with the Adaptive Lasso," German Economic Review, Verein für Socialpolitik, vol. 13(1), pages 71-85, 02.
  6. Antonio Ciccone & Marek Jarociński, 2010. "Determinants of Economic Growth: Will Data Tell?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 222-246, October.
  7. David F. Hendry & Hans-Martin Krolzig, 2004. "We Ran One Regression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 799-810, December.
  8. David F. Hendry & Hans-Martin Krolzig, 2004. "We Ran One Regression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 799-810, December.
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