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Long‐Run Growth Differences and the Neoclassical Growth Model
Author(s) -
Maynard Norman
Publication year - 2016
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12179
Subject(s) - economics , explanatory power , econometrics , growth model , growth theory , macroeconomics , neoclassical economics , philosophy , epistemology
This paper shows that allowing factor income share differences across countries in a modified Solow model can imply differences in output growth rates across countries. Using cross‐sectional data for 52 countries, an empirical illustration shows that the parameters of the modified model are intuitively plausible, jointly significant, and possess modest explanatory power (R 2 around 0.25). The paper emphasizes the methodological importance of simplifying assumptions on applied theory.