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Why do growth rates differ? Evidence from cross-country data on private sector production

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  • Kilponen, Juha
  • Virén, Matti

Abstract

We estimate a standard production function with a new cross-country data set on business sector production, wages and R&D investment for a selection of 14 OECD countries including the United States. The data sample covers the years 1960-2004. The data suggest that growth differences can largely be explained by capital deepening and an ability to produce new technology in the form of new patents. The importance of patents is magnified by the openness of the economy. We find some evidence of increasing elasticity of substitution over time, all though the results are sensitive to assumptions on the nature of technological progress.

Suggested Citation

  • Kilponen, Juha & Virén, Matti, 2008. "Why do growth rates differ? Evidence from cross-country data on private sector production," Bank of Finland Research Discussion Papers 13/2008, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2008_013
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    2. Viren, Matti, 2016. "Why isn't Europe Growing?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(4), pages 317-340.
    3. Virén, Matti, 2012. "How can growth be accelerated in Europe?," Research Discussion Papers 29/2012, Bank of Finland.
    4. Viren Matti, 2015. "Remedies for European growth problem," Discussion Papers 104, Aboa Centre for Economics.
    5. Virén, Matti, 2012. "How can growth be accelerated in Europe?," Bank of Finland Research Discussion Papers 29/2012, Bank of Finland.

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    More about this item

    Keywords

    growth; R&D; production function; patents;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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