Abstract
Abstract The aim of this paper is to provide an overview of empirical cross-country growth literature. The paper begins with describing the basic framework used in recent empirical crosscountry growth research. Even though this literature was mainly inspired by endogenous growth theories, the neoclassical growth model is still the workhorse for cross-country growth empirics. The second part of the paper emphasises model uncertainty, which is indeed immense but generally neglected in the empirical cross-country growth literature. The most outstanding feature of the literature is that a large number of factors have been suggested as fundamental growth determinants. Together with the small sample property, this leads to an important problem: model uncertainty. The questions which factors are more fundamental in explaining growth dynamics and hence growth differences are still the subject of academic research. Recent attempts based on general-to-specific modeling or model averaging are promising but have their own limits. Finally, the paper highlights the implications of model uncertainty for policy evaluation.
Highlights
Why do growth rates vary across countries? Why are some countries are growing rapidly and some are not growing at all? Do countries convergence or diverge in terms of per capita income? Which factors are effective in promoting economic growth? These questions are the central motivation of the recent empirical cross-country growth literature
We reviewed the recent cross-country growth literature aiming to explain growth differences across countries using regression analysis and other statistical methods
For instance Mankiw (1995) argues that “[I]f the goal is to explain why standard of living is higher today than a century ago, neoclassical model is not very illuminating. . . [A] more challenging goal is to explain the variation in economic growth that we observe in different countries in different times ( p.280). . . [E]ndogenous growth models provide a plausible description of worldwide advances in knowledge
Summary
Why do growth rates vary across countries? Why are some countries are growing rapidly and some are not growing at all? Do countries convergence or diverge in terms of per capita income? Which factors are effective in promoting economic growth? These questions are the central motivation of the recent empirical cross-country growth literature. Following the seminal studies by Kormendi and Meguire (1985), Barro (1991) and Mankiw, Romer and Weil (1992), a large number of empirical works have emerged over the last few decades. This renewed interest arose from recent developments in the theory of endogenous growth and the increasing availability of multicountry growth data sets, e.g. the Penn World Tables, (Summers and Heston (1988, 1991)). For instance Barro (1997, p.8) argues that “[I]t is surely an irony that one of the lasting contributions of endogenous growth theory is that it stimulated empirical work that demonstrated the explanatory power of the neoclassical growth model.” the neoclassical growth model firstly developed by Solow (1956) and Swan (1956) is a starting point of most cross-country growth studies
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
