Blunt Instruments: On Establishing the Causes of Economic Growth

47 Pages Posted: 22 May 2009 Last revised: 22 Jul 2010

See all articles by Michael A. Clemens

Michael A. Clemens

Center for Global Development; IZA-Institute for the Study of Labor

Samuel Bazzi

Boston University - Department of Economics

Date Written: May 20, 2009

Abstract

Concern has intensified in recent years that many instrumental variables used in widely-cited growth regressions may be invalid, weak, or both. Attempts to remedy this general problem remain inadequate. We demonstrate that a range of published growth regressions may contain spurious results because of hidden problems with the instrumental variables they use. We urge several steps to surpass these difficulties: grounding of growth regressions in slightly more generalized theoretical models, deployment of the latest methods for estimating sensitivity to violations of exclusion restrictions, opening the “black box” of GMM with supportive evidence of instrument strength, and utilization of weak-instrument robust tests and estimators.

Keywords: economic growth, development, causation, identification, instrumental variable, valid instrument, weak instrument, causal effect, endogeneity

JEL Classification: F35, C12, O4

Suggested Citation

Clemens, Michael Andrew and Bazzi, Samuel, Blunt Instruments: On Establishing the Causes of Economic Growth (May 20, 2009). Center for Global Development Working Paper No. 171, Available at SSRN: https://ssrn.com/abstract=1408286 or http://dx.doi.org/10.2139/ssrn.1408286

Michael Andrew Clemens (Contact Author)

Center for Global Development ( email )

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Washington, DC 20036
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IZA-Institute for the Study of Labor ( email )

HOME PAGE: http://www.iza.org/profile?key=4270

Samuel Bazzi

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

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