Testing Solow's Implications on the Effective Development Policy

35 Pages Posted: 1 Jan 2014

See all articles by Hyeok Jeong

Hyeok Jeong

KDI School of Public Policy and Management

Date Written: November 2013

Abstract

The core of the neoclassical growth theory is the capital investment. Solow proposed that the diminishing return is key to such growth process in establishing the stability of the equilibrium growth path. This key postulation has critical implications on the sustainable and effective development policy, suggesting the importance of productivity and human capital in both steady-state and capital-driven transitional growth. This paper suggests a novel way to test the diminishing return assumption and confirmed its strong presence using the Penn World Tables version 8.0 data, hence validates Solows implications on effective development policies.

Keywords: Capital investment, Diminishing return, TFP, Human capital, Development policy, Development effectiveness

JEL Classification: O11, O15, O47

Suggested Citation

Jeong, Hyeok, Testing Solow's Implications on the Effective Development Policy (November 2013). KDI School of Pub Policy & Management Paper No. 13-07. Available at SSRN: https://ssrn.com/abstract=2373350 or http://dx.doi.org/10.2139/ssrn.2373350

Hyeok Jeong (Contact Author)

KDI School of Public Policy and Management ( email )

P.O. Box 184
Seoul, 130-868
Korea, Republic of (South Korea)
+82-2-880-2921 (Phone)
+82-2-879-1496 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
36
Abstract Views
256
PlumX Metrics