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Accounting for the Cross--country Differences in Income and Physical and Human Capital


  • Akos Valentinyi
  • Berthold Herrendorf


We ask whether the three-sector neoclassical growth model can account for the large cross-country differences in the levels of per-capita income, in the stocks of physical and human capital, and in the relative prices of capital. We use a version in which one sector produces services, a second sector produces manufactured goods including capital goods, and a third sector produces human capital. We allow for cross-country differences in sectoral TFP and in taxes on the sectors' productions. We find that cross-country differences in sectoral TFP can account for the differences in the relative price of capital goods, in the capital-output ratios in international prices, and in the stocks of human capital. In contrast, differences in taxes are of much lesser importance

Suggested Citation

  • Akos Valentinyi & Berthold Herrendorf, 2004. "Accounting for the Cross--country Differences in Income and Physical and Human Capital," 2004 Meeting Papers 786, Society for Economic Dynamics.
  • Handle: RePEc:red:sed004:786

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    More about this item


    Total Factor Productivity; Development Facts; Relative Price of Capital; Human Capital Accumulation;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General


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