Andros Kourtellos

Are Any Growth Theories Robust

This paper 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.

Structural Threshold Regression

This paper extends the simple threshold regression framework of Hansen (2000) and Caner and Hansen (2004) to allow for endogeneity of the threshold variable. We develop a concentrated least squares estimator of the threshold parameter based on an inverse Mills ratio bias correction. We show that our estimator is consistent and investigate its performance using a Monte Carlo simulation that indicates the applicability of the method in …nite samples.

Measuring the Strength of the Theories of Government Size

This paper investigates the role of model uncertainty in explaining the different findings in the literature regarding the determinants of government expenditure and its components. In particular, we systematically assess the evidentiary support for nine different theories using a novel model averaging method that allows for endogeneity. Our results suggest that the government size and its components are explained by multiple mechanisms that work simultaneously but differ in their impact and importance. Hence, policymakers should avoid relying on any particular model to make policy decisions. More precisely, for general government total expenditure we find decisive evidence for the demography theory and a strong evidence for the globalization and political institution theory. In the case of central government total expenditure, we find that income inequality and macroeconomic policy play a decisive role in addition to demography.

Robust Correlates of Growth Spells: Do Inequality and Redistribution Matter?

Theoretical and empirical evidence provides only partial guidance about the relationship between growth, inequality, and redistribution. Much of the problem stems from model uncertainty about what covariates to use, the relationships between them, and the channels through which inequality can affect growth. This paper investigates the relationship between inequality, redistribution, and the duration of growth spells in the presence of a rich set of alternative determinants, by explicitly accounting for model uncertainty using model averaging for duration models. We find that lower net inequality is robustly correlated with longer growth spells. Redistribution appears generally benign for growth spells, but the effect is not robust. In addition, there is no evidence of nonlinearities in the inequality-redistribution-growth spell relationship. Finally, lower initial income, higher secondary education, and higher FDI are associated with longer spell duration.

Endogeneity in Semiparametric Threshold Regression

In this paper, we investigate semiparametric threshold regression models with endogenous threshold variables based on a nonparametric control function approach. Using a series approximation we propose a two-step estimation method for the threshold parameter. For the regression coefficients, we consider least-squares estimation in the case of exogenous regressors and two-stage least-squares estimation in the case of endogenous regressors. We show that our estimators are consistent and derive their asymptotic distribution for weakly dependent data. Furthermore, we propose a test for the endogeneity of the threshold variable, which is valid regardless of whether the threshold effect is zero or not. Finally, we assess the performance of our methods using a Monte Carlo simulation.