Why Run a Million Regressions? Endogenous Policy and Cross Country Growth Empirics

Arbeitspapier

This paper analyzes the link between growth and public policy when the latter depends on economically important fundamentals. When policy is endogenous the measured effects of policy on growth will generally be biased. Using a widely quoted theoretical model, the signs of the biases are derived. It is shown that the usually reported effects on growth of tax rate variables related to GDP, the ratio of public investment to total investment and the ratio of redistributive transfers to GDP are generally biased downwards. Based on these signed biases the paper discusses some empirical results that seem puzzling from a theoretical viewpoint.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Darmstadt Discussion Papers in Economics ; No. 140

Classification and Topics

• Classification: Wirtschaft
• Subject: Growth ; Public Policy ; Cross-Sectional Models ; Wirtschaftswachstum ; Finanzpolitik ; Regression ; Bias ; Theorie ; Cross-Sectional Model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Rehme, Günther
• Event: Veröffentlichung
• (who): Technische Universität Darmstadt, Department of Law and Economics
• (where): Darmstadt
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/22523
• Last update: 10.03.2025, 11:44 AM CET