IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A simple Monte Carlo approach to examine sample robustness in growth regressions

  • Daniel Kaffine

    ()

    (Division of Economics and Business, Colorado School of Mines)

  • Graham A. Davis

    ()

    (Division of Economics and Business, Colorado School of Mines)

Growth regressions are often influenced by extreme observations in the sample. We demonstrate the usefulness of a simple Monte Carlo method as a diagnostic for sample robustness. We apply the technique to a data set used by Mehlum et al. (2006), who show that institutional quality is decisive for growth in resource rich countries. Monte Carlo sampling reveals that this result hinges crucially on the inclusion of Malaysia in the sample of countries. Inclusion of Malaysia yields robust, significant estimates of the key interaction term between resource abundance and institutions, whereby strong institutions can turn resource abundance into a blessing. Exclusion of Malaysia yields robust, insignificant estimates of the interaction term, whereby institutions cannot overcome the resource curse. Further explorations find that the remaining results in Mehlum et al. (2006) are similarly sensitive to the sample of countries included. We argue that the Monte Carlo method utilised provides easily interpretable representations of the robustness of estimates to an arbitrary sample of countries and should become standard practice in growth regression diagnostics, similar to robustness testing of alternative specifications and additional covariates.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econbus.mines.edu/working-papers/wp201304.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Colorado School of Mines, Division of Economics and Business in its series Working Papers with number 2013-04.

as
in new window

Length: 32 pages
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:mns:wpaper:wp201304
Contact details of provider: Postal: Golden, Colorado 80401
Phone: (303) 273-3480
Fax: (303) 273-3416
Web page: http://econbus.mines.edu/

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Boschini, Anne & Pettersson, Jan & Roine, Jesper, 2013. "The Resource Curse and its Potential Reversal," World Development, Elsevier, vol. 43(C), pages 19-41.
  2. Rodrik, Dani, 1997. "TFPG Controversies, Institutions, and Economic Performance in East Asia," CEPR Discussion Papers 1587, C.E.P.R. Discussion Papers.
  3. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  4. Alan J. Auerbach & Kevin A. Hassett & Stephen D. Oliner, 1992. "Reassessing the social returns to equipment investment," Working Paper Series / Economic Activity Section 129, Board of Governors of the Federal Reserve System (U.S.).
  5. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. William R. Hauk & Romain Wacziarg, 2004. "A Monte Carlo Study of Growth Regressions," NBER Technical Working Papers 0296, National Bureau of Economic Research, Inc.
  7. Shawn Knabb, 2005. "The contribution of institutions, trade, and geography to the development process: How robust is the empirical evidence to variations in the sample?," Empirical Economics, Springer, vol. 30(2), pages 393-409, 09.
  8. Anne D. Boschini & Jan Pettersson & Jesper Roine, 2007. "Resource Curse or Not: A Question of Appropriability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 593-617, 09.
  9. Xavier Sala-I-Martin & Gernot Doppelhofer & Ronald I. Miller, 2004. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," American Economic Review, American Economic Association, vol. 94(4), pages 813-835, September.
  10. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  11. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May.
  12. Balazs Egert, 2012. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-Cyclical?," CESifo Working Paper Series 3777, CESifo Group Munich.
  13. Catherine Norman, 2009. "Rule of Law and the Resource Curse: Abundance Versus Intensity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(2), pages 183-207, June.
  14. Thomas Herndon & Michael Ash & Robert Pollin, 2013. "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogo ff," Working Papers wp322, Political Economy Research Institute, University of Massachusetts at Amherst.
  15. Frederick Van der Ploeg, 2010. "Natural Resources: Curse or Blessing?," CESifo Working Paper Series 3125, CESifo Group Munich.
  16. Jonathan R. W. Temple, 1998. "Robustness tests of the augmented Solow model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(4), pages 361-375.
  17. NONNEMAN, Walter & VANHOUDT, Patrick, 1995. "A further augmentation of the Solow model and the empirics of economic growth for OECD countries," SESO Working Papers 1995005, University of Antwerp, Faculty of Applied Economics.
  18. Xavier X. Sala-i-Martin, 1997. "I Just Ran Four Million Regressions," NBER Working Papers 6252, National Bureau of Economic Research, Inc.
  19. Robinson, James A. & Torvik, Ragnar & Verdier, Thierry, 2006. "Political foundations of the resource curse," Journal of Development Economics, Elsevier, vol. 79(2), pages 447-468, April.
  20. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  21. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp201304. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Edward Balistreri)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.