Economic Growth and Returns to Scale

This paper develops a regression equation nesting a variant of Rebelo's(1991) AK model with Solow’s(1956) neoclassical model and tests whether three samples of countries support endogenous or exogenous growth models. The test exploits both time-series and cross-sectional features of the data analyzed In the 88 Non-oil and the 72 Intermediate country group, their empirical results provide no evidence that individual countries face diminishing returns to the accumulation oj reproducible capital. The empirical results of two group countries are more consistent with endogenous growth model than with Solow’s neoclassical growth model. However, the result in the OECD countries is more consistent with exogenous growth than with endogenous growth model since we found evidence that individual countries face diminishing returns to the stock of reproducible factors.