Paul Johnson, Steven Durlauf and Jonathan Temple 1123They have also helped to establish the clear limits that exist in employing statis-
tical methods to address growth questions. One implication of these limits is that
narrative and historical approaches have a lasting role to play in empirical growth
analysis, as we will repeatedly emphasize.
The remainder of the chapter is organized as follows. Section 24.2 briefly
sketches some of the relevant stylized facts. Section 24.3 describes the relationship
between theoretical growth models and econometric frameworks for growth, with
a focus on cross-country growth regressions and then an alternative approach, the
“levels regression.” Section 24.4 describes methods for identifying growth deter-
minants, and a range of questions concerning model specification and evaluation
are addressed. Section 24.5 discusses econometric issues that arise according to
whether one is using cross-section, time series or panel data. Section 24.6 provides
an extended discussion of endogeneity and the associated use of instrumental vari-
able methods. Section 24.7 covers some remaining econometric issues, including
the role of outliers and measurement error. Section 24.8 concludes by highlighting
some possible directions for future research.
24.2 Stylized facts
The survey by Durlaufet al.(2005) and the textbook by Acemoglu (2008) include
overviews of stylized facts, concentrating on the period between 1960 and 2000.
Some of the relevant facts can be summarized as follows:
- Over the 40-year period as a whole, most countries have grown richer, but
vast income disparities remain. For all but the richest group, growth rates
have differed to an unprecedented extent, regardless of the initial level of
development. - Although past growth is a surprisingly weak predictor of future growth, it is
slowly becoming more accurate over time, and so distinct winners and losers are
beginning to emerge. The strongest performers are located in East and Southeast
Asia, which have sustained growth rates at unprecedented levels. The weakest
performers are predominantly located in sub-Saharan Africa, where some coun-
tries have barely grown at all, or even become poorer. The record in South and
Central America is also distinctly mixed. In these regions, output volatility is
high, and dramatic output collapses are not uncommon. - For many countries, growth rates were lower in 1980–2000 than in 1960–80,
and this growth slowdown is observed throughout most of the income distribu-
tion. Moreover, the dispersion of growth rates has increased. A more optimistic
reading would also emphasize the growth take-off that has taken place in China
and India, home to two-fifths of the world’s population and, historically at least,
a greater proportion of the world’s poor.
Recent observers, such as Collier (2007), have particularly emphasized the emer-
gence of a distinct set of countries, home to perhaps a billion people, where
stagnation or slow growth is the norm. These countries appear locked out of