A Re-Examination of the Determinants of Economic Growth Using Simultaneous Equation Dynamic Panel Data Models

This paper advances a dynamic simultaneous equation panel framework to re-examine the determinants of economic growth in a large cross-country data set. Besides caputring the simultaneity of the potential determinants of economic growth and carefully separating short- from long-run dynamics, the framework advanced allows for a variety of other features of cross-country growth data, including heterogeneity and cross-sectional dependence. Evidence shall be adduced as to which (if any) of the variables that have been prominently suggested in the empirical growth literature to be determinants of growth are in fact at least long-run forcing. Furthermore, summary statistics shall be presented regarding the quantitative strength of the long-run relation between these variables and output growth and the possible long-run feedback from these variables onto output growth.