Testing the Validity of the Solow Growth Model: Empirical Evidence from Cross-Country Panel Data

2018 ◽  
Vol 3 (1) ◽  
pp. 18-22
Author(s):  
Chigozie Nelson Nkalu ◽  
Richardson Kojo Edeme ◽  
Queen O. Chukwuma
Keyword(s):  
Panel Data ◽  
Growth Model ◽  
Capital Stock ◽  
Important Variable ◽  
Solow Model ◽  
Related Literature ◽  
Solow Growth Model ◽  
Real Gdp ◽  
Output Side ◽  
Cross Country

This study seeks to test for the validity of the Solow growth model using cross-country panel data. Panel OLS analysis was adopted following an extensive review of recent and related literature with output-side of the real GDP as the dependent variable with other variables like population, capital stock and employment as the independent. However, population and capital stock are positively impacting the output with statistically significant value, while employment is not an important variable in the model even though it exhibits a negative and statistically significant effect to the output. In conclusion, the estimation result conforms the postulations of the basic Solow and augmented Solow growth model thereby validating the Solow model across-countries.

scholarly journals The Augmented SOLOW Model And The OECD Sample

2011 ◽  
Vol 2 (7) ◽  
Author(s):  
Giorgio Canarella ◽  
Stephen K. Pollard
Keyword(s):  
Explanatory Power ◽  
Physical Capital ◽  
National Accounts ◽  
Solow Model ◽  
Solow Growth Model ◽  
Output Elasticity ◽  
Wide Range ◽  
Penn World Table ◽  
Cross Country ◽  
Using Data

In their influential work on the augmented Solow model, Mankiw, Romer and Weil (1992) showed that cross-section evidence was reasonably consistent with the Solow growth model augmented to include human capital for a wide range of countries. However, for the sample of OECD countries, they found that the model had low explanatory power and underestimated the output elasticity of physical capital. We revisit their seminal work using data from the recently released version 6.1 of the Penn World Table. We find that the ability of the augmented Solow model to explain the cross-country variation in income per capita in the OECD sample improves significantly. Our results highlight the importance of taking into account changes that take place over time in the collection and measurement of national accounts data in estimating and testing the augmented Solow model.

Kaldor's Growth Theory

1992 ◽  
Vol 14 (1) ◽  
pp. 36-54 ◽  
Author(s):  
Nancy J. Wulwick
Keyword(s):  
Growth Model ◽  
Technical Progress ◽  
Growth Models ◽  
Increasing Returns ◽  
Growth Theory ◽  
Solow Model ◽  
Solow Growth Model ◽  
Policy Interventions ◽  
Long Run ◽  
Endogenous Technical Progress

The last decade has seen an outburst of growth models designed to replace the conventional Solow growth model, with its exogenous trend of technical progress, by more realistic models that generate increasing returns (to labor, capital and/or scale) as a result of endogenous technical progress. In contrast to the Solow model, the new models suggest that policy interventions can affect the long-run rate of economic growth. Nicholas Kaldor's growth model, designed in the late 1950s and early 1960s to replace the Solow growth model, is a precursor of the new growth models.

scholarly journals The Next Generation of the Penn World Table

2015 ◽  
Vol 105 (10) ◽  
pp. 3150-3182 ◽  
Author(s):  
Robert C. Feenstra ◽  
Robert Inklaar ◽  
Marcel P. Timmer
Keyword(s):  
Theory And Practice ◽  
Living Standards ◽  
Productive Capacity ◽  
Benchmark Data ◽  
Real Gdp ◽  
Second Growth ◽  
Development Accounting ◽  
Penn World Table ◽  
Output Side ◽  
Cross Country

We describe the theory and practice of real GDP comparisons across countries and over time. Version 8 of the Penn World Table expands on previous versions in three respects. First, in addition to comparisons of living standards using components of real GDP on the expenditure side, we provide a measure of productive capacity, called real GDP on the output side. Second, growth rates are benchmarked to multiple years of cross-country price data so they are less sensitive to new benchmark data. Third, data on capital stocks and productivity are (re)introduced. Applications including the Balassa-Samuelson effect and development accounting are discussed. (JEL C43, C82, E01, E23, I31, O47)

Institutions-augmented solow model and income clubs

2011 ◽  
Vol 17 (2) ◽  
pp. 5
Author(s):  
Edinaldo Tebaldi ◽  
Ramesh Mohan
Keyword(s):  
Growth Model ◽  
Poverty Traps ◽  
Income Convergence ◽  
Factor Productivity ◽  
Solow Model ◽  
Poor Countries ◽  
Solow Growth Model ◽  
Income Gap ◽  
Quality Of Institutions

Growth economists still face major challenges and limitations to incorporate institutions into the standard growth framework. This article develops a simple institutions-augmented Solow growth model --that can be used in the classroom and for policy discussions --that accounts for the interactions between institutions and factor-productivity and examine the impacts of the quality of institutions on levels and growth rates of output. The institutions-augmented growth model shows that differences in the quality of institutions preclude income convergence and determine both the level and the growth rate of output per worker. The model also shows that poor institutions induce poverty traps. Furthermore, the income gap between rich and poor countries will not disappear if poor countries’ institutions do not improve relative to their rich counterpart.  

scholarly journals Relationship between Health Expenditure and GDP in an Augmented Solow Growth Model for Pakistan: An Application of Co-integration and Error-Correction Modeling

2003 ◽  
Vol 8 (2) ◽  
pp. 1-16 ◽  
Author(s):  
Aurangzeb Aurangzeb
Keyword(s):  
Growth Model ◽  
Health Expenditure ◽  
Technological Changes ◽  
Solow Model ◽  
Health Capital ◽  
Specification Tests ◽  
Solow Growth Model ◽  
Short Run ◽  
Per Capita ◽  
Error Correction Modeling

This paper examines the temporal interdependence between gross domestic product and health expenditure per capita for Pakistan in an augmented Solow growth model suggested by Mankiw, Romer and Weil (1992) for the period of 1973-2001. This paper is an extension of the MRW model by incorporating health capital proxied by health expenditure to the augmented Solow model. Moreover, an openness variable is also included in the model in order to capture the effect of technological changes on growth. The paper employs co-integration, ECM methodology and several diagnostic and specification tests. The empirical findings show a significant and positive relationship between GDP and Health Expenditure, both in the long- and short-run.

scholarly journals Tolerance, Cultural Diversity and Economic Growth: Evidence from Dynamic Panel Data Analysis

Economies ◽  
2021 ◽  
Vol 9 (1) ◽  
pp. 20
Author(s):  
Osama Alhendi ◽  
József Tóth ◽  
Péter Lengyel ◽  
Péter Balogh
Keyword(s):  
Panel Data ◽  
Cultural Diversity ◽  
English Language ◽  
Panel Data Analysis ◽  
Dynamic Panel Data ◽  
Policy Implications ◽  
Social Tolerance ◽  
Solow Model ◽  
Related Equation ◽  
The Impact

This study aims to examine the impact of social tolerance of cultural diversity, and the ability to speak widely spoken languages, on economic performance. Based on the literature, the evidence is still controversial and unclear. Therefore, the study used panel data relating to (99) non-English speaking economies during the time period between 2009 and 2017. Following the augmented Solow model approach, the related equation was expanded, in this study, to include (besides human capital) social tolerance, the English language (as a lingua franca) and the level of openness. The model was estimated using the two-step system GMM approach. The results show that social tolerance of diversity and English language competence have a positive, but insignificant impact on the economy. Regarding policy implications, government and decision-makers can avoid the costs deriving from cultural diversity by adopting democratic and effective institutions that aim to achieve cultural justice and recognition, which, in turn, enhance the level of tolerance, innovation and productivity in the economy. Moreover, to ease intercultural communication within heterogeneous communities, it is necessary to invest in enhancing the quality of second language education which is necessary to make society more tolerant and the country more open to the global economy.

scholarly journals The Time Delays’ Effects on the Qualitative Behavior of an Economic Growth Model

2013 ◽  
Vol 2013 ◽  
pp. 1-10 ◽  
Author(s):  
Carlo Bianca ◽  
Massimiliano Ferrara ◽  
Luca Guerrini
Keyword(s):  
Economic Growth ◽  
Growth Model ◽  
Time Delays ◽  
Sufficient Conditions ◽  
Qualitative Behavior ◽  
Solow Model ◽  
Normal Form Theory ◽  
Economic Growth Model ◽  
Form Theory ◽  
The Stability

A further generalization of an economic growth model is the main topic of this paper. The paper specifically analyzes the effects on the asymptotic dynamics of the Solow model when two time delays are inserted: the time employed in order that the capital is used for production and the necessary time so that the capital is depreciated. The existence of a unique nontrivial positive steady state of the generalized model is proved and sufficient conditions for the asymptotic stability are established. Moreover, the existence of a Hopf bifurcation is proved and, by using the normal form theory and center manifold argument, the explicit formulas which determine the stability, direction, and period of bifurcating periodic solutions are obtained. Finally, numerical simulations are performed for supporting the analytical results.

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