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The Solow model in the empirics of growth and trade

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  • 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.
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  • Erich Gundlach, 2007. "The Solow model in the empirics of growth and trade," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 23(1), pages 25-44, Spring.
    • Handle: RePEc:oup:oxford:v:23:y:2007:i:1:p:25-44
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    File URL: http://hdl.handle.net/10.1093/oxrep/grm002
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    5. John Knight & Sai Ding, 2008. "Can the Augmented Solow Model Explain China's Economic Growth? A Cross-Country Panel Data Analysis," Economics Series Working Papers 380, University of Oxford, Department of Economics.
    6. Merna Mohamed Esmat Hefnawi & Hebatallah Ghoneim, 2020. "Human Capital and Economic Growth in Egypt," Proceedings of Business and Management Conferences 10112451, International Institute of Social and Economic Sciences.
    7. Mau, Karsten, 2014. "Margins, Gravity, and Causality: Export Diversification and Income Levels Reconsidered," GIGA Working Papers 249, GIGA German Institute of Global and Area Studies.
    8. Gundlach, Erich, 2007. "Arbeitssparender technischer Fortschritt und Löhne," Kiel Working Papers 1382, Kiel Institute for the World Economy (IfW Kiel).
    9. Ding, Sai & Knight, John, 2009. "Can the augmented Solow model explain China's remarkable economic growth? A cross-country panel data analysis," Journal of Comparative Economics, Elsevier, vol. 37(3), pages 432-452, September.

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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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