Growth and Volatility Reconsidered: Reconciling Opposite Views

Table 12

Dependent variable: growth rate of per capita GDP. Regressors: volatility of GDP growth, consumption growth, investment growth, government consumption growth, and control variables. Sample: OECD countries (21 countries). Horizon: 1978–2007. Annual observations. All regressions include year dummies. All regressions are population weighted.

Static models weighted estimations—restricted sample
Estimation	FE	FE	FE	FE-IV 2sls	FE -IV 2sls	FE-IV 2sls
GDP volatility	0.319***		0.513**	0.224		0.859***
	(2.99)		(2.48)	(1.55)		(3.15)
Consumption volatility		−1.038***	−1.09***		−1.165***	−1.25***
		(−7.43)	(−7.78)		(−6.53)	(−7.02)
Investment volatility		0.139***	0.017		0.089**	−0.107
		(4.68)	(0.29)		(2.27)	(−1.44)
Government consumption volatility		0.003	−0.020		−0.052	−0.106
		(0.03)	(−0.19)		(−0.36)	(−0.73)
Education	0.004	0.007**	0.007**	−0.002	0.002	0.002
	(1.33)	(2.11)	(2.22)	(−0.41)	(0.48)	(0.31)
Population growth	0.623*	0.626*	0.620*	2.36***	2.079***	2.059***
	(1.85)	(1.92)	(1.91)	(5.00)	(4.60)	(4.62)
Initial GDP	−0.039***		−0.023**	−0.0452***	−0.029**	−0.024**
	(−4.00)		(−2.45)	(−3.56)	(−2.38)	(−1.99)
Investment share of GDP	0.085***		0.080***	−0.097***	−0.091***	−0.089***
	(8.44)		(8.56)	(−4.91)	(−4.83)	(−4.80)
Observations	630	630	630	567	567	567
Instruments	no	no	no	yes	yes	yes
Hansen 𝐽 statistic (𝑃 value)				0.339	0.541	0.560
Kleibergen-Paap Wald 𝐹 statistic				170.679	171.291	175.060

Note: 𝑇-statistics in parenthesis, robust SEs. *Significance at 10%, **significance at 5%, and ***significance at 1%.