For helpful comments on earlier drafts, we thank Oscar Jorda, Judith Giles, Wayne Joerding, and participants in seminars at the University of California, Irvine, the University of Victoria, the University of Oregon, and the University of Hawaii, Jonathan Temple, David Hendry, Katarina Juselius, Søren Johanssen, the organizers and participants in the conference, ‘Bridging Economics and Econometrics: Empirical Applications and Econometric Methods’ at the European University Institute, 6–9 June 2001, and an anonymous referee. We also thank Orley Ashenfelter for his help in getting this project off the ground, and Jeannine Henderson and Michael Dowell for able research assistance.
Truth and Robustness in Cross-country Growth Regressions*
Article first published online: 25 NOV 2004
Oxford Bulletin of Economics and Statistics
Volume 66, Issue 5, pages 765–798, December 2004
How to Cite
Hoover, K. D. and Perez, S. J. (2004), Truth and Robustness in Cross-country Growth Regressions. Oxford Bulletin of Economics and Statistics, 66: 765–798. doi: 10.1111/j.1468-0084.2004.101_1.x
- Issue published online: 25 NOV 2004
- Article first published online: 25 NOV 2004
- Final Manuscript Received: January 2004
We re-examine studies of cross-country growth regressions by Levine and Renelt (American Economic Review, Vol. 82, 1992, pp. 942–963) and Sala-i-Martin (American Economic Review, Vol. 87, 1997a, pp. 178–183; Economics Department, Columbia, University, 1997b). In a realistic Monte Carlo experiment, their variants of Edward Leamer's extreme-bounds analysis are compared with a cross-sectional version of the general-to-specific search methodology associated with the LSE approach to econometrics. Levine and Renelt's method has low size and low power, while Sala-i-Martin's method has high size and high power. The general-to-specific methodology is shown to have a near nominal size and high power. Sala-i-Martin's method and the general-to-specific method are then applied to the actual data from Sala-i-Martin's original study.