Growth regressions and data revisions in Penn World Tables

Abstract

PurposePenn World Tables (PWT) data on output measured at international prices are the data most frequently used in cross‐country growth regressions. These data are subject to revision, and the amendments can be substantial for a minority of countries, although negligible for most. The purpose of this paper is to investigate the effect of data revisions on research results using the data.Design/methodology/approachUsing Hanushek and Kimko's analysis of the relationship between growth and schooling quality and Sala‐i‐Martin's tests of model selection, the authors investigate how much the results of cross‐country growth regressions vary if the most recent vintage (6.2) of PWT data is used, rather than the previous vintage (6.1).FindingsThe variation is substantial enough to imply significant differences in research results using different vintages of the PWT data.Practical implicationsThe results reinforce the case for examining the sensitivity of growth regressions to outliers, which may be subject to subsequent data revision that might substantially affect the conclusions.Originality/valuePrevious research has identified significant revisions between successive vintages of PWT growth data, but has implied that this is not likely to affect the results of cross‐country growth regressions based on long‐run averages rather than on annual data. The findings suggest that this is not necessarily the case.

Trade openness and bigger governments: The role of country size revisited

“…In the public economics literature, Cameron (1978) is among the first to note that trade openness in OECD countries is positively related to subsequent government size. Since the size of governments may carry macroeconomic consequences, for example impeding economic growth (see Barro and Lee, 1994;Barro, 2001;Afonso and Furceri, 2010;Bergh and Henrekson, 2011), it is important to understand which factors shape the extent of the public sector.…”

“…Checking the robustness of empirical results across various updates of the PWT within the cross-country growth literature has unveiled serious concerns regarding many key insights from older versions (Johnson et al, 2013), drawing into question the robustness of standard results. To date, these analyses center around the GDP per capita estimates and the resulting growth literature, for example by Atherton et al (2011) and Ciccone and Jarocinski (2010). 2 The results stemming from our extensions of Ram (2009) provide another avenue beyond cross-country growth for which the robustness of key empirical results is not immune to alternative updates of the Penn World Table . Finally, quantile analyses are able to trace out a better understanding as to where exactly the suggested relationships are present.…”

A replication of ‘The long-run impact of foreign aid in 36 African countries: Insights from multivariate time series analysis’ (Oxford Bulletin of Economics and Statistics, 2014)

“…The results vary strongly from one dataset to another and the main result -that countries with higher volatility have lower growth -collapses using some versions of the PWT. In a similar exercise, Atherton et al (2011) replicate Hanushek and Kimko (2000)'s analysis of the link between labour force quality and economic growth using PWT 6.1 and 6.2, also inducing significant differences in the results. Equally using PWT 6.1 and 6.2, Ciccone and Jarociński (2010) assess the robustness of Sala-i-Martin et al ( 2004)'s 'agnostic' approach to growth empirics to differences in the data.…”