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A Projection Pursuit Approach to Cross Country Growth Data


  • Andros Kourtellos


The empirical modeling of the cross-country differences in growth behavior is undoubtedly one of the most predominant research topics in applied macro-econometrics. However, despite the vast research effort it seems that there are only a few firm conclusions on the sources of cross-country differences. Unlike the bulk of the literature which focuses on linear parametric models this paper studies a semi-parametric way of modelling. In particular, it employs projection pursuit regression (PPR) to model the mean regression function of the growth process by a sum of unknown ridge functions (functions of linear combinations of covariates). PPR model was proposed by Friedman and Stuetzle (1981) to approximate high dimensional functions by simpler functions that operate in low dimensional spaces-typically one-dimensional. My findings identify non-linear relationships among the basic Solow-type variables. In particular, initial income and human capital affect growth in a very nonlinear way. Furthermore, there is evidence of interaction effects between human capital and initial income as well as between initial income and population growth rates. The findings suggest the presence of two steady-state equilibria that classify countries into two groups with different convergence characteristics.

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  • Andros Kourtellos, 2002. "A Projection Pursuit Approach to Cross Country Growth Data," University of Cyprus Working Papers in Economics 0213, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:0213

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    References listed on IDEAS

    1. Bernard, Andrew B. & Durlauf, Steven N., 1996. "Interpreting tests of the convergence hypothesis," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 161-173.
    2. 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 365-384, Oct.-Dec..
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    4. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    5. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
    6. William A. Brock & Steven N.Durlauf, 2000. "Growth Economics and Reality," NBER Working Papers 8041, National Bureau of Economic Research, Inc.
    7. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
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    Cited by:

    1. Verda Salman & Aliya H. Khan & Madeeha Gohar Qureshi, 2015. "Issues in Statistical Modelling of Human Capital and Economic Growth Nuxus: A Cross Country Analysis," PIDE-Working Papers 2015:126, Pakistan Institute of Development Economics.
    2. Durlauf, Steven N. & Kourtellos, Andros & Minkin, Artur, 2001. "The local Solow growth model," European Economic Review, Elsevier, vol. 45(4-6), pages 928-940, May.
    3. Morier, Bruno & Teles, Vladimir Kühl, 2016. "A Time-Varying Markov-Switching Model For Economic Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 20(06), pages 1550-1580, September.
    4. Cohen-Cole, Ethan B. & Durlauf, Steven N. & Rondina, Giacomo, 2012. "Nonlinearities in growth: From evidence to policy," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 42-58.
    5. ArdIc, Oya PInar, 2006. "The gap between the rich and the poor: Patterns of heterogeneity in the cross-country data," Economic Modelling, Elsevier, vol. 23(3), pages 538-555, May.
    6. Durlauf,S.N., 2003. "The convergence hypothesis after 10 years," Working papers 6, Wisconsin Madison - Social Systems.
    7. Kerekes, Monika, 2009. "Growth miracles and failures in a Markov switching classification model of growth," Discussion Papers 2009/11, Free University Berlin, School of Business & Economics.

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