Solow (1956) as a Model of Cross-Country Growth Dynamics

Posted: 25 Jun 2008

See all articles by Kieran McQuinn

Kieran McQuinn

Central Bank and Financial Services Authority of Ireland

Karl Whelan

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department

Date Written: Spring 2007

Abstract

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

Suggested Citation

McQuinn, Kieran and Whelan, Karl, Solow (1956) as a Model of Cross-Country Growth Dynamics (Spring 2007). Oxford Review of Economic Policy, Vol. 23, Issue 1, pp. 45-62, 2007, Available at SSRN: https://ssrn.com/abstract=1151121 or http://dx.doi.org/10.1093/oxrep/grm009

Kieran McQuinn (Contact Author)

Central Bank and Financial Services Authority of Ireland ( email )

P.O. 559 Dame Street
Dublin 2, D2
Ireland

Karl Whelan

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department ( email )

Dame Street
P.O. Box 559
Dublin 2
Ireland

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