Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth
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- 1 April 2013
- journal article
- Published by American Economic Association in American Economic Journal: Macroeconomics
- Vol. 5 (2), 152-186
- https://doi.org/10.1257/mac.5.2.152
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 show how a range of published studies can offer more evidence that their results are not spurious. Key steps include: grounding growth regressions in more generalized theoretical models, deployment of new 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. (JEL C52, E23, F35, O41, O47)Keywords
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