Working Paper

The Solow Model in the Empirics of Growth and Trade

Kiel Working Papers, 1294

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 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.

Author

Erich Gundlach

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Publication Date
JEL Classification
O40, F11