Publication: Applying Growth Theory across Countries
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2001-05
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2014-03-27
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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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“Solow, Robert M.. 2001. Applying Growth Theory across Countries. World Bank Economic Review. © World Bank. http://hdl.handle.net/10986/17444 License: CC BY-NC-ND 3.0 IGO.”
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World Bank Economic Review
1564-698X
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