Publication: Leveraging Growth Regressions for Country Analysis
Loading...
Published
2024-04-10
ISSN
Date
2024-04-10
Author(s)
Editor(s)
Abstract
This paper shows how growth regressions can be useful for analyzing a country’s growth performance. Growth regressions describe changes in key macroeconomic variables that countries typically experience during their growth process. Such partial correlations facilitate comparative analysis, can usually be linked to policies, and can hence be informative from a policy perspective. Against this background, the paper introduces a new data set of growth correlates spanning more than 150 countries from 1970 to 2019. Additionally, it presents several econometric reference models and details their application for country-level growth analysis. Two distinct metrics highlight infrastructure and human capital as exhibiting the strongest correlations with growth.
Link to Data Set
Citation
“Wacker, Konstantin M.; Beyer, Robert C. M.; Moller, Lars Christian. 2024. Leveraging Growth Regressions for Country Analysis. Policy Research Working Paper; 10751. © World Bank. http://hdl.handle.net/10986/41402 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication Direct and Indirect Impacts of Transport Mobility on Access to Jobs: Evidence from South Africa(Washington, DC: World Bank, 2025-11-12)Access to jobs is essential for economic growth. In Africa, unemployment rates are notably high. This paper reexamines the relationship between transport mobility and labor market outcomes, with a particular focus on the direct and indirect effects of transport connectivity. As predicted by theory, wages are influenced by the level of commuting deterrence. Generally, higher earnings are associated with longer commute times and/or higher commuting costs. Local accessibility is also important, especially for individuals with time constraints. Both direct and indirect impacts are found to be significant in South Africa, where job accessibility has been challenging since the end of apartheid. For the direct impact, the wage elasticity associated with commuting costs is significant. Returns on commute are particularly high for women. Local accessibility to socioeconomic facilities, such as shops and health services, is also found to have a significant impact, consistent with the concept of mobility of care. To enhance employment, therefore, it is crucial to connect people not only to job locations but also to various socioeconomic points of interest, such as markets and hospitals, in an integrated manner. This integration will enable individuals to spend more time working and commuting longer distances.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication From Policy to Practice: Lessons from the Implementation of the Refugee Work Rights Policy in Ethiopia(Washington, DC: World Bank, 2025-11-10)This paper examines the early implementation of Ethiopia’s refugee work rights policy, with a focus on the issuance of permits that enable refugees to engage in economic activities. Building on significant legal and institutional advances under the 2019 Refugee Proclamation and subsequent directives, the analysis explores how these reforms are being operationalized in practice. Using a mixed-methods approach, combining document review, administrative data analysis, and semi-structured interviews, the paper identifies both progress and remaining challenges. Permit issuance has increased since the adoption of detailed operational guidance in 2024, reflecting the Government of Ethiopia’s commitment to operationalizing its progressive legal framework and ensuring that refugees can exercise their right to work. However, take-up remains modest, with about 5.2 percent of the working-age population holding a permit. Preliminary evidence suggests that coordination gaps, limited subnational capacity, low awareness among refugees and employers, and disincentives to formalize in a largely informal labor market are contributing to the low take-up. The paper offers policy suggestions, grounded in the Ethiopian context and emerging evidence, to help translate legal commitments into improved labor market outcomes for refugees.Publication Monitoring Global Aid Flows: A Novel Approach Using Large Language Models(Washington, DC: World Bank, 2025-11-04)Effective monitoring of development aid is the foundation for assessing the alignment of flows with their intended development objectives. Existing reporting systems, such as the Organisation for Economic Co-operation and Development’s Creditor Reporting System, provide standardized classification of aid activities but have limitations when it comes to capturing new areas like climate change, digitalization, and other cross-cutting themes. This paper proposes a bottom-up, unsupervised machine learning framework that leverages textual descriptions of aid projects to generate highly granular activity clusters. Using the 2021 Creditor Reporting System data set of nearly 400,000 records, the model produces 841 clusters, which are then grouped into 80 subsectors. These clusters reveal 36 emerging aid areas not tracked in the current Creditor Reporting System taxonomy, allow unpacking of “multi-sectoral” and “sector not specified” classifications, and enable estimation of flows to new themes, including World Bank Global Challenge Programs, International Development Association–20 Special Themes, and Cross-Cutting Issues. Validation against both Creditor Reporting System benchmarks and International Development Association commitment data demonstrates robustness. This approach illustrates how machine learning and the new advances in large language models can enhance the monitoring of global aid flows and inform future improvements in aid classification and reporting. It offers a useful tool that can support more responsive and evidence-based decision-making, helping to better align resources with evolving development priorities.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Ethiopia’s Growth Acceleration and How to Sustain It(World Bank, Washington, DC, 2015-06)Ethiopia has experienced a growth acceleration over the past decade on the back of an economic strategy emphasizing public infrastructure investment and supported by heterodox macro-financial policies. To analyze the country’s growth performance during 2000–13, the paper employs a neoclassical cross-country System Generalized Method of Moments regression model. The analysis finds that accelerated growth was driven by public infrastructure investment and restrained government consumption, and supported by a conducive external environment. Macroeconomic challenges arising from declining private credit, real currency overvaluation, and relatively high inflation held back some growth. The model accurately predicts Ethiopia’s growth over the period of analysis and is robust to country-specific parameter heterogeneity and alternative infrastructure variables. Looking ahead, model simulations under alternative policy scenarios are indicative that growth may decelerate in the coming decade, making it challenging for Ethiopia to attain its middle-income country target by 2025. Although simulated growth rates do not vary much by policy scenario, the paper discusses some of the emerging risks associated with a continued reliance on the current infrastructure financing model and potential future adjustments.Publication Explaining Ethiopia’s Growth Acceleration—The Role of Infrastructure and Macroeconomic Policy(Elsevier, 2017-08)Ethiopia has experienced an impressive growth acceleration over the past decade. This was achieved on the back of an economic strategy emphasizing public infrastructure investment supported by heterodox macro-financial policies. This paper identifies the drivers of Ethiopia’s recent growth episode and examines the extent to which they were typical or unique. It combines country-specific information with the results of a cross-country panel regression model. We find that Ethiopia’s growth is explained well by factors correlating with growth in a broad range of countries in recent decades, including public infrastructure investment, restrained government consumption, and a conducive external environment. On the other hand, we argue that the policy mix that supported very high levels of public investment in Ethiopia was, to some extent, unique. Interestingly, macroeconomic imbalances due to this heterodox policy mix only moderately held back growth which helps explain why Ethiopia was able to grow so fast in spite of their presence: their negative effects were quantitatively much less important than the positive growth drivers they helped to achieve. The results suggest that “getting infrastructure right” may outweigh moderate shortcoming in the macro framework at early stages of development. We further relate this country-specific finding to the recent growth literature.Publication Benchmarking the Determinants of Economic Growth in Latin America and the Caribbean(World Bank, Washington, DC, 2014-12)The Latin America and Caribbean (LAC) region has seen a decade of remarkable growth and income convergence. Growth has been a key driver for reducing poverty and boosting shared prosperity. It has been debated how much of this decade of growth has been driven by policy reforms and how much was due to the favorable external conditions. While external factors were supportive and relevant, the effect of domestic policies was just as relevant for explaining LAC's recent growth performance. The emphasis of domestic policy has shifted from stabilization policies to structural policies. In addition, a benchmarking exercise reveals which policy gaps will lead to the highest potential growth-payoffs for each country and helps identify potential trade-offs. The authors analyze growth in LAC using descriptive statistics and growth econometrics. The authors use these results for explaining the pattern of growth in LAC over the last decade, for looking ahead, and to identify potential policy gaps.Publication Good Enough for Outstanding Growth(World Bank, Washington, DC, 2022-08)This paper investigates the outstanding economic growth experience of Bangladesh. It shows that the country’s improvements in structural correlates of growth from 1990 to 2004 are in the global top 5 percent for any 15-year period since 1970. They were driven by infrastructure enhancements, more openness to trade, and increasing foreign direct investment. Additionally, this period coincided with significant financial reforms after the banking crisis of the late 1980s and increased political stability. A further increase in growth after 2005 was not correlated with new growth impulses from structural improvements. Instead, the benefits from previous achievements and a stable macroeconomic and institutional environment were “good enough” to prevent the mean reversion of growth that comparable fast-growing economies usually experience.Publication Understanding Latin America and the Caribbean’s Income Gap(World Bank, Washington, DC, 2015-07)Even nearly ten years of solid growth cannot guarantee long-term income convergence. The countries of the Latin America and Caribbean region (LAC), like other emerging economies, have benefited from a decade of remarkable growth and some income per capita convergence towards the United States and other industrialized countries. Yet, despite this recent progress, LAC still faces a significant per capita income gap with the developed world. The studies in this volume contribute to the ongoing debate on the reasons for this persistent income gap and the potential drivers of convergence, and propose some broad avenues for reform.
Users also downloaded
Showing related downloaded files
Publication Economic Governance Improvements and Sovereign Financing Costs in Developing Countries(World Bank, Washington, DC, 2021-05)Low- and middle-income country governments are increasingly tapping the global debt capital markets. This is increasing the amount of finance available for development, but at a considerably higher cost than traditional external borrowing on concessional terms. Using a novel methodology based on estimating sovereign credit ratings using the Moody’s scorecard, and examining the associations between these ratings and the World Bank’s Country Policy and Institutional Assessment scores, this paper examines how making improvements in the quality of economic policies and institutions can help lower governments’ financing costs. This method aims to overcome the small-sample problem due to the number of rated developing country sovereigns still being relatively limited (although growing). Better economic governance Country Policy and Institutional Assessment scores are associated with better estimated ratings and materially lower financing costs; on average, improvements that are sufficient to increase the Country Policy and Institutional Assessment economic governance indicator score by one point are associated with interest costs that are lower by about 40 basis points, even setting aside the direct impact on ratings of better governance indicators. There are many reasons why improving governance is a good thing. Among them is the potential payoff to the public purse — savings of $40 million or more on a standard $1 billion, 10-year bond.Publication Data Transparency and Growth in Developing Economies during and after the Global Financial Crisis(World Bank, Washington, DC, 2020-12)The study explores the effects of data transparency on economic growth for developing economies over a unique time period—at the onset of the 2007–2009 global financial crisis and thereafter. Data transparency is defined as the timely production of credible statistics as measured by the Statistical Capacity Indicator. The paper finds that data transparency has a positive effect on real gross domestic product per capita during a period of considerable uncertainty. The estimates indicate an elasticity of the magnitude of 0.03 percent per year, which is much larger than the elasticity of trade openness and schooling in the estimation sample. The empirics employ a variety of econometric estimators, including dynamic panel and cross-sectional instrumental variables estimators, with the latter approach yielding a higher estimated elasticity. The findings are robust to the inclusion of several factors in addition to political institutions and exogenous commodity-price and external debt-financing shocks.Publication Governance in Sub-Saharan Africa in the 21st Century(Washington, DC: World Bank, 2024-03-04)What can be learned from the governance trajectory of African countries since the beginning of the 21st century What is the quality of governance on the African continent and how does it shape development The first decade of the millennium saw promising growth and poverty reduction in much of the continent. Yet, Sub-Saharan Africa has also been the stage of a stream of governance reform failures and policy reversals, and many countries continue to suffer from the consequences of poor governance. This paper explores the dynamics of governance reform on the continent over the past two decades and points to four key trends. First, effective state institutions, capable of maintaining peace, fostering growth, and delivering services, have developed unevenly. Second, progress has been made on enhancing the inclusiveness and accountability of institutions, but it remains constrained by the weakness of checks and balances and the persistence of patterns of centralized and exclusive power arrangements. Third, civic capacity has risen considerably, but the inability of institutions to respond to social expectations and political mobilization threatens to turn liberal civic engagement into distrust, populism, and radicalization. Fourth, the combination of these three trends contributes to the rise of political instability, which constitutes a major threat for the continent.Publication Evolution of the World Bank’s Thinking on Governance(World Bank, Washington, DC, 2016-01)The preparation work for the 2017 World Development Report on Governance and the Law in 2016 will coincide with the 25th anniversary of the World Bank’s decision to broaden its ongoing work on public sector management to embrace key issues of governance in the Bank’s borrowing countries. This paper provides a broad overview of the major Bank reports on governance that went through a review process at a sufficiently high level in the institution that they can reasonably be described as reflecting the Bank’s considered views at the time on the subject. The objective is to review the evolution of the Bank’s thinking on governance and assess the relevance and effectiveness of the work and its implications for the forthcoming World Development Report. Section two of this paper begins with a brief account of how the Bank came to focus on issues of governance, reviewing the major upheaval of governance in many of the Bank’s borrowing countries in the 1980s, the legal constraints the Articles of Agreement impose on the Bank’s work on governance, and a brief overview of the Bank’s initial policy statement on governance issued to the Bank’s Board in June 1991. Section three reviews major Bank work on governance as reflected in successive World Development Reports and examines the Bank’s analysis of the issue of corruption, reviewing how the Bank’s thinking on this symptom of poor governance has evolved. Section four steps back to assess what the Bank got right and some of the issues it missed or failed to address adequately. Section five draws attention to the dramatic changes experienced by the developing world in these past 25 years, and points to the need to better understand the implications of these changes for the governance context facing developing countries.Publication Statistical Performance Indicators and Index(World Bank, Washington, DC, 2021-03)The World Bank’s Statistical Capacity Index has been widely employed to measure country statistical capacity since its inception two decades ago. This paper builds on the existing advantages of the Statistical Capacity Index, conceptually and empirically, to offer new statistical performance indicators and the Statistical Performance Index, which can better measure a country’s statistical performance. The new index has clearer conceptual motivations, employs a stronger mathematical foundation, and significantly expands the number of indicators and countries covered. The paper further provides empirical evidence that illustrates the strong correlation of the new index with other commonly used development indicators of human capital, governance, poverty, and inequality. The framework can accommodate future directions to improve the index as the global data landscape evolves