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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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File URL: http://papers.econ.ucy.ac.cy/RePEc/papers/0213.pdf
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Paper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 0213.

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Length: 26 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:ucy:cypeua:0213
Contact details of provider: Web page: http://www.econ.ucy.ac.cy

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  1. Andrew B. Bernard & Steven N. Durlauf, 1994. "Interpreting Tests of the Convergence Hypothesis," NBER Technical Working Papers 0159, National Bureau of Economic Research, Inc.
  2. Durlauf,S.N. & Quah,D.T., 1998. "The new empirics of economic growth," Working papers 3, Wisconsin Madison - Social Systems.
  3. 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..
  4. William A. Brock & Steven N.Durlauf, 2000. "Growth Economics and Reality," NBER Working Papers 8041, National Bureau of Economic Research, Inc.
  5. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  6. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
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