A SENSITIVITY ANALYSIS OF CROSS-COUNTRY GROWTH REGRESSIONS

TLDR

Cross‑country regressions are widely used to investigate links between long‑run growth and various policy, political, and institutional factors. The study tests the robustness of prior cross‑country growth findings to minor changes in the conditioning variables. Most prior results are fragile, yet a robust positive link exists between growth and investment share, and between investment share and trade intensity, while the paper delineates when per‑capita output convergence is supported.

Abstract

A vast literature uses cross-country regressions to search for empirical linkages between long-run growth rates and a variety of economic policy, political, and institutional indicators. This paper examines whether the conclusions from existing studies are robust or fragile to small changes in the conditioning information set. The authors find that almost all results are fragile. They do, however, identify a positive, robust correlation between growth and the share of investment in GDP and between the investment share and the ratio of international trade to GDP. The authors clarify the conditions under which there is evidence of per capita output convergence.