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Solow (1956) as a Model of Cross-Country Growth Dynamics

  • McQuinn, Kieran

    (Central Bank and Financial Services Authority of Ireland)

  • Whelan, Karl

    (Central Bank and Financial Services Authority of Ireland)

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 behaviour of technological progress 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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Paper provided by Central Bank of Ireland in its series Research Technical Papers with number 1/RT/07.

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Length: 28 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:cbi:wpaper:1/rt/07
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  1. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  2. Erich Gundlach, 2006. "The Solow Model in the Empirics of Cross-Country Growth," DEGIT Conference Papers c011_015, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001. "GMM Estimation of Empirical Growth Models," CEPR Discussion Papers 3048, C.E.P.R. Discussion Papers.
  4. Karl Whelan & Kieran McQuinn, 2006. "Conditional convergence revisited : taking Solow very seriously," Open Access publications 10197/242, School of Economics, University College Dublin.
  5. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  6. Kevin Lee & M. Hashem Pesaran & Ron Smith, 1996. "Growth and Convergence in a Multi-Country Empirical Stochastic Solow Model," Working Papers 9637, Economic Research Forum, revised Dec 1996.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  8. Ben S. Bernanke & Refet S. Gurkaynak, 2001. "Is Growth Exogenous? Taking Mankiw, Romer and Weil Seriously," NBER Working Papers 8365, National Bureau of Economic Research, Inc.
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  11. repec:chb:bcchwp:03 is not listed on IDEAS
  12. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
  13. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  14. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
  15. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  16. Kevin Lee & M. Hashem Pesaran & Ron Smith, 1998. "Growth Empirics: A Panel Data Approach- A Comment," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 319-323, February.
  17. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
  18. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  19. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
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