Concept-Based Bayesian Model Averaging and Growth Empirics
CentER Discussion Paper Series No. 2012-017
39 Pages Posted: 17 Feb 2012
Date Written: February 16, 2012
In specifying a regression equation, we need to determine which regressors to include, but also how these regressors are measured. This gives rise to two levels of uncertainty: concepts (level 1) and measurements within each concept (level 2). In this paper we propose a hierarchical weighted least squares (HWALS) method to address these uncertainties. We examine the effects of different growth theories taking into account the measurement problem in the growth regression. We find that estimates produced by HWALS provide intuitive and robust explanations. We also consider approximation techniques when the number of variables is large or when computing time is limited, and we propose possible strategies for sensitivity analysis.
Keywords: Hierarchical model averaging, Growth determinants, Measurement
JEL Classification: C51, C52, C13, C11
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