Accounting for the Cross--country Differences in Income and Physical and Human Capital

Akos Valentinyi () and Berthold Herrendorf

No 786, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We ask whether the three-sector neoclassical growth model can account for the large cross-country differences in the levels of per-capita income, in the stocks of physical and human capital, and in the relative prices of capital. We use a version in which one sector produces services, a second sector produces manufactured goods including capital goods, and a third sector produces human capital. We allow for cross-country differences in sectoral TFP and in taxes on the sectors' productions. We find that cross-country differences in sectoral TFP can account for the differences in the relative price of capital goods, in the capital-output ratios in international prices, and in the stocks of human capital. In contrast, differences in taxes are of much lesser importance

Keywords: Total Factor Productivity; Development Facts; Relative Price of Capital; Human Capital Accumulation (search for similar items in EconPapers)
JEL-codes: E00 (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed004:786

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