The Solow Model in the Empirics of Cross-Country Growth
Erich Gundlach ()
DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade
Translated to a cross-country context, the Solow model (Solow 1956) would predict that international differences in steady state output per person are due to international differences in technology such that the capital output ratio is constant for international differences in steady state capital intensities. Most of the cross-country growth literature that refers to the Solow model has employed a specification where steady state differences in output per person are due to international differences in the capital output ratio for a constant level of technology. My empirical results show that the cross-country data can also be summarized by an alternative empirical specification of the Solow model that uses a measure of institutional technology as an explanatory variable and treats the capital output ratio as part of the regression constant. The steady state implications of the Solow model with regard to international technology differences also appear to matter for empirical studies of trade. In contrast to Hicks neutral technology differences, Harrod neutral technology differences may explain why countries have different factor intensities and end up in different cones of specialization.
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