Robust Growth Determinants
Norwegian School of Economics (NHH) - Department of Economics
University of Cambridge - Faculty of Economics and Politics
February 7, 2011
NHH Dept. of Economics Discussion Paper No. 3/2011
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.
Number of Pages in PDF File: 42
Keywords: Determinants of Economic Growth, Robust Model Averaging, Heteroscedasticity, Outliers, Mixture Models
JEL Classification: C11, C21, C52, O20, O47, O50working papers series
Date posted: February 18, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo2 in 1.907 seconds