An Empirical Investigation into the Causes of Economic Growth in the Third World Using Full Information Maximum Likelihood Estimators

Many empirical studies of economic growth in Third World countries are cross-national studies that have adopted single-equation OLS estimation to identify the determinants of economic growth. The problem with such an approach is that it often suffers from simultaneity bias. The present study adopts Full Information Maximum Likelihood Estimators. The analysis in this paper reveals that simultaneity must not be dismissed and that the conclusions drawn from standard OLS analysis are to be interpreted carefully and in many cases not taken seriously.