Applying Growth Theory across Countries
The potential problem of reverse causality has been obvious to everyone. It has usually been met with the standard econometric dodge: using lagged values of slow-moving variables as instruments. But this cannot be a serious solution to the problem....
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| Format: | Journal Article |
| Language: | English en_US |
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Washington, DC: World Bank
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2001/05/17737093/applying-growth-theory-across-countries-learned-decade-empirical-research-growth http://hdl.handle.net/10986/17444 |
| Summary: | The potential problem of reverse
causality has been obvious to everyone. It has usually been
met with the standard econometric dodge: using lagged values
of slow-moving variables as instruments. But this cannot be
a serious solution to the problem. The causality issue
points to a deeper question: Do cross-country regressions
define a meaningful surface along which countries can move
back and forth at will? If this is the idea, what mechanism
could underlie such a surface? Brock and Durlauf call such a
regression a 'model.' Reader suppose in a
statistical sense it is. But an economic model should have
some internal structure; its causal arrows should rest on
some sort of behavioral mechanism, and that seems to be
missing in this literature. |
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