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Robust Growth Determinants

  • Gernot Doppelhofer
  • Melvyn Weeks

This paper investigates the robustness of determinants of economic growth in the presence of model uncertainty, parameter heterogeneity and outliers. The robust model averaging approach introduced in the paper uses a flexible and parsimonious mixture modeling that allows for fat-tailed errors compared to the normal benchmark case. Applying robust model averaging to growth determinants, the paper finds that eight out of eighteen variables found to be significantly related to economic growth by Sala-i-Martin et al. (2004) are sensitive to deviations from benchmark model averaging. For example, the GDP shares of mining or government consumption, are no longer robust or economically significant once deviations from the normal benchmark assumptions are allowed. The paper identifies outlying observations - most notably Botswana - in explaining economic growth in a cross-section of countries.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2011/wp-cesifo-2011-02/cesifo1_wp3354.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3354.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3354
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  1. 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.
  2. Doppelhofer, G. & Weeks, M., 2005. "Jointness of Growth Determinants," Cambridge Working Papers in Economics 0542, Faculty of Economics, University of Cambridge.
  3. Antonio Ciccone & Marek Jarocinski, 2010. "Determinants of Economic Growth: Will Data Tell?," Working Papers 1009, BBVA Bank, Economic Research Department.
  4. Leamer, Edward E & Leonard, Herman B, 1983. "Reporting the Fragility of Regression Estimates," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 306-17, May.
  5. Fernandez, Carmen & Ley, Eduardo & Steel, Mark F. J., 2001. "Benchmark priors for Bayesian model averaging," Journal of Econometrics, Elsevier, vol. 100(2), pages 381-427, February.
  6. Angus Deaton, 2010. "Price Indexes, Inequality, and the Measurement of World Poverty," American Economic Review, American Economic Association, vol. 100(1), pages 5-34, March.
  7. Zaman, Asad & Rousseeuw, Peter J. & Orhan, Mehmet, 2000. "Econometric applications of high-breakdown robust regression techniques," MPRA Paper 41529, University Library of Munich, Germany.
  8. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," NBER Working Papers 7750, National Bureau of Economic Research, Inc.
  9. David F. Hendry & Carlos Santos, 2004. "Regression Models with Data-based Indicator Variables," Economics Papers 2004-W04, Economics Group, Nuffield College, University of Oxford.
  10. Luisa Corrado & Ron Martin & Melvyn Weeks, 2005. "Identifying and Interpreting Regional Convergence Clusters across Europe," Economic Journal, Royal Economic Society, vol. 115(502), pages C133-C160, 03.
  11. Papageorgiou, Chris, 2007. "Editorial Introduction - Special issue "On the Empirics of Growth Nonlinearities"," Journal of Macroeconomics, Elsevier, vol. 29(3), pages iii-iv, September.
  12. Fern ndez, Carmen & Steel, Mark F.J., 2000. "Bayesian Regression Analysis With Scale Mixtures Of Normals," Econometric Theory, Cambridge University Press, vol. 16(01), pages 80-101, February.
  13. Martin Feldkircher & Stefan Zeugner, 2009. "Benchmark Priors Revisited; On Adaptive Shrinkage and the Supermodel Effect in Bayesian Model Averaging," IMF Working Papers 09/202, International Monetary Fund.
  14. Canova, Fabio, 2001. "Testing for convergence clubs in income per-capita : a predictive density approach," HWWA Discussion Papers 139, Hamburg Institute of International Economics (HWWA).
  15. Durlauf, Steven N & Johnson, Paul A, 1995. "Multiple Regimes and Cross-Country Growth Behaviour," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 365-84, Oct.-Dec..
  16. Olivier Parent & James Lesage, 2005. "Bayesian Model Averaging for Spatial Econometric Models," Post-Print hal-00375489, HAL.
  17. T. Paul Schultz, 1999. "Health and Schooling Investments in Africa," Working Papers 801, Economic Growth Center, Yale University.
  18. Winford H. Masanjala & Chris Papageorgiou, 2008. "Rough and lonely road to prosperity: a reexamination of the sources of growth in Africa using Bayesian model averaging," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 671-682.
  19. Theo Eicher & Chris Papageogiou & Adrian E Raftery, 2007. "Default Priors and Predictive Performance in Bayesian Model Averaging, with Application to Growth Determinants," Working Papers UWEC-2007-25-P, University of Washington, Department of Economics.
  20. Jesus Crespo-Cuaresma & Gernot Doppelhofer & Martin Feldkircher, 2009. "The Determinants of Economic Growth in European Regions," wiiw Working Papers 57, The Vienna Institute for International Economic Studies, wiiw.
  21. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
  22. Klein, Roger W & Brown, Stephen J, 1984. "Model Selection When There Is "Minimal" Prior Information," Econometrica, Econometric Society, vol. 52(5), pages 1291-1312, September.
  23. Leamer, Edward E, 1982. "Sets of Posterior Means with Bounded Variance Priors," Econometrica, Econometric Society, vol. 50(3), pages 725-36, May.
  24. Jan- Sturm & Jakob de Haan, 2005. "Determinants of long-term growth: New results applying robust estimation and extreme bounds analysis," Empirical Economics, Springer, vol. 30(3), pages 597-617, October.
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