The Solow Model in the Empirics of Growth and Trade

Posted: 25 Jun 2008

Date Written: Spring 2007

Abstract

Translated to a cross-country context, the Solow model (Solow, ) 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 empirical 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 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

JEL Classification: O40, F11

Suggested Citation

Gundlach, Erich, The Solow Model in the Empirics of Growth and Trade (Spring 2007). Oxford Review of Economic Policy, Vol. 23, Issue 1, pp. 25-44, 2007. Available at SSRN: https://ssrn.com/abstract=1151113 or http://dx.doi.org/10.1093/oxrep/grm002

Erich Gundlach (Contact Author)

University of Hamburg ( email )

Department of Economics
Von-Melle-Park 5
Hamburg, 20146
Germany
+49 40 428384589 (Phone)

HOME PAGE: http://www.erichgundlach.de

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