Truth and Robustness in Cross‐country Growth Regressions*

Abstract We re‐examine studies of cross‐country growth regressions by Levine and Renelt ( American Economic Review , Vol. 82, 1992, pp. 942–963) and Sala‐i‐Martin ( American Economic Review , Vol. 87, 1997a, pp. 178–183; Economics Department, Columbia, University, 1997b). In a realistic Monte Carlo experiment, their variants of Edward Leamer's extreme‐bounds analysis are compared with a cross‐sectional version of the general‐to‐specific search methodology associated with the LSE approach to econometrics. Levine and Renelt's method has low size and low power, while Sala‐i‐Martin's method has high size and high power. The general‐to‐specific methodology is shown to have a near nominal size and high power. Sala‐i‐Martin's method and the general‐to‐specific method are then applied to the actual data from Sala‐i‐Martin's original study.