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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)

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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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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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  2. repec:att:wimass:1919983 is not listed on IDEAS
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  8. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May. [Downloadable!] (restricted)
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  10. Papageorgiou, Chris, 2002. "Trade as a threshold variable for multiple regimes," Economics Letters, Elsevier, vol. 77(1), pages 85-91, September. [Downloadable!] (restricted)
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  11. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier. [Downloadable!] (restricted)
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  21. Chris Papageorgiou & John Duffy & Fidel Perez-Sebastian, . "Capital-Skill complementarity? Evidence from a Panel of Countries," Departmental Working Papers 2003-12, Department of Economics, Louisiana State University. [Downloadable!]
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  24. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
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