Growth and convergence in a multi-country empirical stochastic Solow model

✍ Scribed by Kevin Lee; M. Hashem Pesaran; Ron Smith

• Publisher: John Wiley and Sons
• Year: 1997
• Tongue: English
• Weight: 328 KB
• Volume: 12
• Category: Article
• ISSN: 0883-7252
• DOI: 10.1002/(sici)1099-1255(199707)12:4<357::aid-jae441>3.0.co;2-t

✦ Synopsis

The paper considers international per capita output and its growth using a panel of data for 102 countries between 1960 and 1989. It sets out an explicitly stochastic Solow growth model and shows that this has quite dierent properties from the standard approach where the output equation is obtained by adding an error term to the linearized solution of a deterministic Solow model. It examines the econometric properties of estimates of beta convergence as traditionally de®ned in the literature and shows that all these estimates are subject to substantial biases. Our empirical estimates clearly re¯ect the nature and the magnitude of these biases as predicted by econometric theory. Steady state growth rates dier signi®cantly across countries and once this heterogeneity is allowed for the estimates of beta are substantially higher than the consensus in the literature. But they are very imprecisely estimated and dicult to interpret. The paper also discusses the economic implications of these results for sigma convergence.