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The Solow model with CES technology: nonlinearities and parameter heterogeneity

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Author Info

  • Winford H. Masanjala

    (Department of Economics, Louisiana State University, USA)

  • Chris Papageorgiou

    (Department of Economics, Louisiana State University, USA)

Abstract

This paper examines whether nonlinearities in the aggregate production function can explain parameter heterogeneity in the Solow growth regressions. Nonlinearities in the production technology are introduced by replacing the commonly used Cobb-Douglas (CD) aggregated production specification with the more general Constant-Elasticity-of-Substitution (CES) specification. We first justify our choice of production function by showing that cross-country regressions favour the CES over the CD technology. Then, by using an endogenous threshold methodology we show that the Solow model with CES technology is consistent with the existence of multiple regimes. Copyright © 2004 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.722
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 19 (2004)
Issue (Month): 2 ()
Pages: 171-201

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Handle: RePEc:jae:japmet:v:19:y:2004:i:2:p:171-201

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  1. Kaz Miyagiwa & Chris Papageorgiou, 2003. "Elasticity of substitution and growth: normalized CES in the Diamond model," Economic Theory, Springer, vol. 21(1), pages 155-165, 01.
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  22. Liu, Zhenjuan & Stengos, Thanasis, 1999. "Non-linearities in Cross-Country Growth Regressions: A Semiparametric Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 527-38, Sept.-Oct.
  23. Costas AZARIADIS & David DE LA CROIX, 2002. "Growth or equality ? Losers and gainers from financial reform," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002036, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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