Journal
EUROPEAN ECONOMIC REVIEW
Volume 45, Issue 4-6, Pages 928-940Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/S0014-2921(01)00120-9
Keywords
Solow growth model; parameter heterogeneity; varying coefficients
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This paper generalizes the empirical analysis of the Solow growth model to account for country-specific heterogeneity. This generalization relaxes the assumption made in bulk of empirical growth studies that all countries possess identical aggregate production functions. Our empirical results indicate that there is substantial country-specific heterogeneity in the Solow parameters-heterogeneity that is associated with differences in initial income. We therefore conclude that the explanatory value of the Solow growth model is substantially enhanced by allowing for country-specific, i.e. local, production functions. (C) 2001 Elsevier Science B.V. All rights reserved.
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