Assessing parametric misspecification and heterogeneity in growth regression

A fully nonparametric analysis is applied to address the problems of nonlinearity and heterogeneity in classical growth regression models using original data from seminal contributions in this field. Nonparametric specification tests and in-sample goodness-of-fit measures, as well as cross-validation based out-of-sample measures provide considerable evidence for parametric misspecification and a superior performance of a nonparametric model, despite the small sample size. In contrast to recent contributions identifying heterogeneity as the primal source of misspecification, a formal and graphical analysis does not reveal evidence for heterogeneity in a parametric and nonparametric quantile regression framework.