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Model uncertainty in cross-country growth regressions

✍ Scribed by Carmen Fernández; Eduardo Ley; Mark F. J. Steel

Publisher
John Wiley and Sons
Year
2001
Tongue
English
Weight
175 KB
Volume
16
Category
Article
ISSN
0883-7252

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✦ Synopsis

Abstract

We investigate the issue of model uncertainty in cross‐country growth regressions using Bayesian Model Averaging (BMA). We find that the posterior probability is spread widely among many models, suggesting the superiority of BMA over choosing any single model. Out‐of‐sample predictive results support this claim. In contrast to Levine and Renelt (1992), our results broadly support the more ‘optimistic’ conclusion of Sala‐i‐Martin (1997b), namely that some variables are important regressors for explaining cross‐country growth patterns. However, care should be taken in the methodology employed. The approach proposed here is firmly grounded in statistical theory and immediately leads to posterior and predictive inference. Copyright © 2001 John Wiley & Sons, Ltd.

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