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Solow ( 1956 ) as a model of cross-country growth dynamics

  • Kieran McQuinn
  • Karl Whelan

Despite the widespread popularity of the Solow growth model, much of the recent empirical work based on the classic framework misrepresents a crucial feature of the model. Namely, the growth rate of technological progress, assumed to be exogenous in the Solow model, is often identified as being constant across countries. This simplification of the behavior of technological progess runs counter to the evidence and has had a number of significant implications for the interpretation of the Solow model. One implication has been an overemphasis on the role of factor accumulation in explaining cross-country income differentials. In addition, the commonly-cited empirical result that the speed of conditional convergence is slower than predicted by the Solow model is a function of this inaccurate assumption about technology rather than due to a failure of the model itself.

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Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

Volume (Year): 23 (2007)
Issue (Month): 1 (Spring)
Pages: 45-62

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Handle: RePEc:oup:oxford:v:23:y:2007:i:1:p:45-62
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  16. McQuinn, Kieran & Whelan, Karl, 2006. "Conditional Convergence Revisited: Taking Solow Very Seriously," Research Technical Papers 7/RT/06, Central Bank of Ireland.
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  19. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
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