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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 25, No. 2, pp.137-151
ISSN: 1225-0279 (Print)
Print publication date 30 May 2012
Received 24 Feb 2012 Revised 10 May 2012 Accepted 11 May 2012

Why We Learn Nothing from Regressing Economic Growth on Policies

Dani Rodrik
Rafiq Hariri Professor, John F. Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138, USA, Tel: +1-617-495-9454, Fax: +1-617-496-5747 dani_rodrik@harvard.edu

JEL Classification: O4

Abstract

Government use policy to achieve certain outcomes. Sometimes the desired ends are worthwhile, and sometimes they are pernicious. Cross-country regressions have been the tool of choice in assessing the effectiveness of policies and the empirical relevance of these two diametrically opposite views of government behavior. When government policy responds systematically to economic or political objectives, the standard growth regression in which economic growth (or any other performance indicator) is regressed on policy tells us nothing about the effectiveness of policy and whether government motives are good or bad.

Keywords:

Economic growth

Acknowledgments

I thank Bill Easterly, Jon Temple, and participants at the Kennedy School Lunch Group on International Economic Policy (LIEP) for helpful suggestions.

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