Journal Article

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

Kieran McQuinn and Karl Whelan

in Oxford Review of Economic Policy

Published on behalf of The Oxford Review of Economic Policy Ltd

Volume 23, issue 1, pages 45-62
Published in print March 2007 | ISSN: 0266-903X
Published online January 2007 | e-ISSN: 1460-2121 | DOI: http://dx.doi.org/10.1093/oxrep/grm009
Solow (1956) as a model of cross-country growth dynamics

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  • Economic Growth and Aggregate Productivity
  • Technological Change; Research and Development
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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 progess runsounter 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.

Keywords: growth; convergence; TFP; Solow; O41; O30; C23

Journal Article.  7051 words.  Illustrated.

Subjects: Economic Growth and Aggregate Productivity ; Technological Change; Research and Development ; Single Equation Models; Single Variables

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