| Working Paper
95-12
by Steven M. Sheffrin and Robert
K. Triest
This paper examines the issue of causality in cross-sectional
empirical models of economic growth. Using an approach
to determining causal structures based on tests for
conditional independence in sets of variables, we uncover
alternative causal structures that are consistent with
the correlation pattern of the variables in the data.
We use these methods to develop alternative causal empirical
models of economic growth. One of our consistent findings
is that we can rule out the possibility that equipment
investment causes growth. Our search procedure leads
naturally to a structural model with latent variables
which we then estimate. The results of our estimation
are broadly consistent with traditional models of economic
growth augmented for human capital.
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