Lecture 14: Empirical Evidence on Economic Growth

1. Data Sets a. Summers and Heston: Penn World Tables on real income, investment and

consumption adjusted for differences in purchasing power b. Barro and Lee: Education and human capital

2. Growth accounting exercises: Alwyn Young etc 3. Absolute convergence, conditional convergence and ! convergence: definitions and

results a. No absolute convergence: good news for endogenous growth models? b. Conditional convergence: regional data sets (states within USA, Japanese

prefectures, regions within European, Latin American, and other Asian countries). Speed of convergence: roughly 2 percent per year (Barro and Sala-i-Martin 1992).

c. ! convergence: Lant Prichet (1997) “Divergence, Big Time”

4. Mankiw, Romer, and Weil (1992 QJE) is a classic paper finding empirical support to

Solow’s neoclassical growth model. Details to be presented in lecture 15. 5. Levine and Renelt (1992 AER): sensitivity analysis using extreme bounds test to

identify “robust” determinants of growth. a. Pessimistic outcome: almost nothing is robust.

6. Quah (1996 EJ): Twin Peaks. Later shown to be not very robust. See Jones (1997) on the evolution of the world income distribution.

7. Sala-i-Martin: “I just ran 4 million regressions”

a. Criticize Levine and Renelt approach b. Analyse entire distribution c. Found 21 variables out of 59 candidates to be significant at 95 percent interval