Kiel Working Papers, Kiel Institute for World Economics
No 1294:
The Solow Model in the Empirics of Growth and Trade
Erich Gundlach
Abstract: Translated to a cross-country context, the Solow model
(Solow, 1956) predicts that international differences in steady state
output per person are due to international differences in technology for a
constant capital output ratio. However, most of the cross-country growth
literature that refers to the Solow model has employed a specification
where steady state differences in output per person are due to
international differences in the capital output ratio for a constant level
of technology. My empirical results show that the former specification can
summarize the data quite well by using a measure of institutional
technology and treating the capital output ratio as part of the regression
constant. This reinterpretation of the cross-country Solow model provides
an interesting implication for empirical studies of international trade.
Harrod-neutral technology differences as presumed by the Solow model can
explain why countries have different factor intensities and may end up in
different cones of specialization.
Keywords: Solow Model, Lerner diagram; (follow links to similar papers)
JEL-Codes: O40,; F11; (follow links to similar papers)
29 pages, September 2006
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