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Modeling Parameter Heterogeneity in Cross Country Growth Regression Models

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  • Andros Kourtellos

Abstract

Given the failure of the conventional linear Solow growth model to establish reliable results in the analysis cross-country growth performance, this paper proposes a new framework using the concept of hierarchy of time-scales. By hierarchy of time scales, I mean that slower moving variables such as culture, play a major role in determining medium moving variables such as institutions, and which in turn play a major role in determining faster moving variables such as the conventional determinants of economics growth. This approach provides a systematic way of thinking about the heterogeneity in the cross-country growth performance. In the context of the Solow growth model the hierarchical approach suggests a local generalization of the Solow growth model in the form of a semiparametric varying parameter model along the lines of Hastie and Tibshirani (1992). Using the varying coefficient model, this paper studies two examples. In the first example the parameters of the model vary according to initial human capital while in the second they vary according to a measure of ethnic diversity. The results suggest that there exists substantial parameter heterogeneity in the cross-country growth process.

Suggested Citation

  • Andros Kourtellos, 2002. "Modeling Parameter Heterogeneity in Cross Country Growth Regression Models," University of Cyprus Working Papers in Economics 0212, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:0212
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    Cited by:

    1. Hineline, David R., 2008. "Parameter heterogeneity in growth regressions," Economics Letters, Elsevier, vol. 101(2), pages 126-129, November.
    2. Kottaridi, Constantina & Stengos, Thanasis, 2010. "Foreign direct investment, human capital and non-linearities in economic growth," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 858-871, September.
    3. Chih Ming Tan, 2010. "No one true path: uncovering the interplay between geography, institutions, and fractionalization in economic development," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1100-1127, November/.
    4. Chih Ming Tan, 2007. "Economic Growth Nonlinearities," Discussion Papers Series, Department of Economics, Tufts University 0701, Department of Economics, Tufts University.
    5. Steven N. Durlauf & Andros Kourtellos & Chih Ming Tan, 2008. "Empirics of Growth and Development," Chapters,in: International Handbook of Development Economics, Volumes 1 & 2, chapter 3 Edward Elgar Publishing.
    6. repec:eee:eecrev:v:94:y:2017:i:c:p:126-147 is not listed on IDEAS
    7. Andros Kourtellos, 2011. "Modeling parameter heterogeneity in cross-country regression models," University of Cyprus Working Papers in Economics 11-2011, University of Cyprus Department of Economics.
    8. Cohen-Cole, Ethan B. & Durlauf, Steven N. & Rondina, Giacomo, 2012. "Nonlinearities in growth: From evidence to policy," Journal of Macroeconomics, Elsevier, pages 42-58.
    9. Henderson, Daniel J. & Papageorgiou, Chris & Parmeter, Christopher F., 2008. "Are any growth theories linear? Why we should care about what the evidence tells us," MPRA Paper 8767, University Library of Munich, Germany.
    10. Andreas Savvides & Theofanis P. Mamuneas & Thanasis Stengos, 2006. "Economic development and the return to human capital: a smooth coefficient semiparametric approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(1), pages 111-132.
    11. Dalgaard, Carl-Johan & Winther Hansen, Jes, 2005. "Capital utilization and the foundations of club convergence," Economics Letters, Elsevier, pages 145-152.
    12. Neophyta Empora & Theofanis Mamuneas, 2011. "The Effect of Emissions on U.S. State Total Factor Productivity Growth," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 3(2), pages 149-172, October.
    13. Stolzenburg, Ulrich, 2014. "Growth determinants across time and space: A semiparametric panel data approach," Economics Working Papers 2014-11, Christian-Albrechts-University of Kiel, Department of Economics.

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    Keywords

    Empirical Growth; Heterogeneity; Hierarchy of Time-Scales; Varying Parameters;

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