DigitalCommons@Linfield

Explaining Differences in Growth across Developing Countries

Jereld R. Nicholson Library

This analysis attempts to explain the differences in per-capita GDP growth in developing countries over the period 2000-2010. Using OLS estimators on an initial cross-section data sample of 30 developing countries, we find that growth rates are positively affected by savings rates in the decade, natural resource endowment, and inflation volatility, while they are hindered by population growth over the decade, savings rates over the previous decade, initial per-capita income, and tropical location. An expansion of economic freedom is found to quadratically relate to growth, at first increasing it and then having a negative effect. Income inequality and landlocked variables are not shown to significantly affect growth rates over this period. However, testing the model on a second sample of developing countries showed markedly different and insignificant explanatory power of the identical variables, suggesting the original model is not robust.