DETERMINANTS OF LONG-TERM GROWTH: A BAYESIAN AVERAGING OF CLASSICAL ESTIMATES (BACE) APPROACH
Gernot Doppelhofer, Ronald I. Miller, and Xavier Sala-i-Martin
NBER Working Paper W7750.
June 17, 2000
This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates as a weighted average of OLS estimates for every possible combination of included variables. The weights applied to individual regressions are justified on Bayesian grounds in a way similar to the well-known Schwarz criterion. Of 32 explanatory variables we find 11 to be robustly partially correlated with long-term growth and another five variables to be marginally related. Of all the variables considered, the strongest evidence is for the initial level of real GDP per capita.
Keywords: Economic Growth, Growth Regressions, Empirical Determinants of Economic Growth, Model Averaging
JEL Classification: O51, O52, O53.
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