In this paper, Xavier X. Sala-i-Martin challenges the traditional "Extreme Bounds" method used in economic growth literature to identify robust empirical relationships. Instead of focusing on the extreme bounds of coefficient estimates, he analyzes the entire distribution of the estimates. His analysis reveals that a substantial number of variables are strongly related to economic growth, contrary to the pessimistic "Nothing is Robust" conclusion often drawn from extreme bounds analysis.
Sala-i-Martin argues that the Extreme Bounds test is too stringent, leading to the incorrect labeling of most variables as non-robust. By examining the full distribution of estimates, he finds that many variables have a high probability of being significantly related to growth. For example, variables such as Rule of Law, Political Rights, Civil Liberties, and the fraction of the population that follows Confucius religion are found to be strongly correlated with growth.
He also finds that variables related to market distortions, such as real exchange rate distortions and the standard deviation of the black market premium, are negatively correlated with growth. Investment types, such as equipment investment, are positively correlated with growth, while non-equipment investment is not significant once aggregate investment is held constant.
The paper also examines the role of the initial level of income, primary school enrollment, and life expectancy in 1960, finding that these variables are strongly correlated with growth. Additionally, variables related to economic organization, such as the degree of capitalism, are found to be positively correlated with growth.
Sala-i-Martin concludes that a substantial number of variables are strongly related to economic growth, and that the Extreme Bounds test is too strict to capture this. By analyzing the full distribution of estimates, he finds that many variables are significantly related to growth, challenging the traditional view that nothing is robust in the economic growth literature.In this paper, Xavier X. Sala-i-Martin challenges the traditional "Extreme Bounds" method used in economic growth literature to identify robust empirical relationships. Instead of focusing on the extreme bounds of coefficient estimates, he analyzes the entire distribution of the estimates. His analysis reveals that a substantial number of variables are strongly related to economic growth, contrary to the pessimistic "Nothing is Robust" conclusion often drawn from extreme bounds analysis.
Sala-i-Martin argues that the Extreme Bounds test is too stringent, leading to the incorrect labeling of most variables as non-robust. By examining the full distribution of estimates, he finds that many variables have a high probability of being significantly related to growth. For example, variables such as Rule of Law, Political Rights, Civil Liberties, and the fraction of the population that follows Confucius religion are found to be strongly correlated with growth.
He also finds that variables related to market distortions, such as real exchange rate distortions and the standard deviation of the black market premium, are negatively correlated with growth. Investment types, such as equipment investment, are positively correlated with growth, while non-equipment investment is not significant once aggregate investment is held constant.
The paper also examines the role of the initial level of income, primary school enrollment, and life expectancy in 1960, finding that these variables are strongly correlated with growth. Additionally, variables related to economic organization, such as the degree of capitalism, are found to be positively correlated with growth.
Sala-i-Martin concludes that a substantial number of variables are strongly related to economic growth, and that the Extreme Bounds test is too strict to capture this. By analyzing the full distribution of estimates, he finds that many variables are significantly related to growth, challenging the traditional view that nothing is robust in the economic growth literature.