Are any growth theories robust?

Abstract

This article investigates the strength of empirical evidence for various growth theories when there is model uncertainty with respect to the correct growth model. Using model averaging methods, we find little evidence that so-called fundamental growth theories play an important role in explaining aggregate growth. In contrast, we find strong evidence for macroeconomic policy effects and a role for unexplained regional heterogeneity, as well as some evidence of parameter heterogeneity in the aggregate production function. We conclude that the ability of cross-country growth regressions to adjudicate the relative importance of alternative growth theories is limited. © Copyright 2008 by the Royal Economic Society (Registered Charity No. 231508).