Empirical Issues And Examples: Growth Theory

Abstract

This paper deals with the growth literature. In particular our fundamental concern in this paper will be the empirical studies which are held nowadays. For this purpose, we will mainly base our study on a recent paper called as “The New Growth Evidence” which was written out by J. Temple (2000) who gives a very detailed discussion of the empirical issues concerning the growth literature. In this work we will not only be giving his paper’s brief summary but also will be pointing out the borders of growth theory with a number of specific examples of empirical studies in growth literature. In this respect, we will organize three types of empirical analysis which are achieved by different estimation procedures. In the first example, we will deal with cross country evidence in which we aim to point out the growth differences between developed and underdeveloped countries. In order to show these differences we will gather data about fifty countries and make cross section analysis in between. We will then use Chow methodology to pinpoint the structural break between developed and underdeveloped countries. In the second example, we will provide a time series analysis of one country, in which we intend to find out whether a country’s productivity level does or does not affect the GNP growth rate. Last and the third example will be given from a panel data analysis, in which we will take the same sample countries as of the cross section analysis. The rationale will be to pool all the countries at first and observe the existence of any regularity and later to apply panel data analysis to each group of country -namely developed and underdeveloped- by the help of cross section analysis. The purpose of this empirical study is to show robustness of the empirical regularities in the homogeneous type countries. In conclusion, the paper will give brief summaries of theoretical and empirical issues which will be covering the boundaries of discussions and more importantly covering all the main types of empirical studies.