Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach
Xavier Sala-I-Martin, Gernot Doppelhofer, Ronald I. Miller
American Economic Review · 2004 · Volume 94 · Issue 4
Abstract
This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It introduces and employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), which constructs estimates by averaging OLS coefficients across models. The weights given to individual regressions have a Bayesian justification similar to the Schwarz model selection criterion. Of 67 explanatory variables we find 18 to be significantly and robustly partially correlated with long-term growth and another three variables to be marginally related. The strongest evidence is for the relative price of investment, primary school enrollment, and the initial level of real GDP per capita.
Keywords
Model Construction and Estimation, Model Evaluation, Validation, and Selection, Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
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