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Why are some countries richer than others? A skeptical view of the Mankiw-Romer-Weil's test of the Neoclassical growth model

Author

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  • Jesus Felipe
  • J. S. L. McCombie

Abstract

This paper provides evidence of a problem with the influential testing and assessment of Solow’s (1956) growth model proposed by Mankiw et al. (1992). It is shown that when the assumption of a common rate of technical progress is relaxed in the neoclassical model, the goodness of fit of Mankiw et al.’s equation improves dramatically. However, and more importantly, it is shown that this result, as well as the magnitude of estimates obtained, merely reflects a statistical artifact. This has serious implications for the possibility of actually testing Solow’s growth model.

Suggested Citation

  • Jesus Felipe & J. S. L. McCombie, 2004. "Why are some countries richer than others? A skeptical view of the Mankiw-Romer-Weil's test of the Neoclassical growth model," CAMA Working Papers 2004-09, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2004-09
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/9_felipepaper_2004.pdf
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    1. is not listed on IDEAS
    2. Kronenberg, Tobias, 2010. "Finding common ground between ecological economics and post-Keynesian economics," Ecological Economics, Elsevier, vol. 69(7), pages 1488-1494, May.
    3. Sergio Cesaratto, 2010. "Endogenous Growth Theory Twenty Years On: A Critical Assessment," Bulletin of Political Economy, Bulletin of Political Economy, vol. 4(1), pages 1-30, June.
    4. Aamer S. Abu-Qarn, 2019. "Reassessment of the Proximate Determinants of Income Levels and Growth of Nations," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(4), pages 463-483, December.
    5. Jesus Felipe & John McCombie, 2012. "Aggregate Production Functions and the Accounting Identity Critique: Further Reflections on Temple's Criticisms and Misunderstandings," Economics Working Paper Archive wp_718, Levy Economics Institute.
    6. Michelle Baddeley, 2006. "Convergence or Divergence? The Impacts of Globalisation on Growth and Inequality in Less Developed Countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 391-410.
    7. Simarmata, Djamester A., 2012. "Appropriate Wage to Economies of Scale for Growth: An Exploratory Study on New Paradigm for Development," MPRA Paper 41581, University Library of Munich, Germany.
    8. Jonathan Temple, 2006. "Aggregate Production Functions and Growth Economics," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(3), pages 301-317.
    9. Bergheim, Stefan, 2007. "Pair-wise cointegration in long-run growth models," Research Notes 24, Deutsche Bank Research.
    10. Julián VILLAMIL SANCHEZ, 2016. "Cálculo de la Productividad Sectorial en Colombia con Herramientas Insumo-Producto," Archivos de Economía 14585, Departamento Nacional de Planeación.
    11. Jonathan Temple, 2010. "Aggregate production functions, growth economics, and the part-time tyranny of the identity: a reply to Felipe and McCombie," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(6), pages 685-692.

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