Applying Growth Theory across Countries

By R. Solow. 2001

116 citations recorded by the source corpus.

I am broadly in sympathy with the spirit of the article by William Brock and Steven Durlauf and that by William Easterly and Ross Levine. They are trying to move the literature in the right direction. I say this even though I have been skeptical from the beginning about the interpretation of cross-country growth regressions. The potential problem of reverse causality has been obvious to everyone. It has usually been met with the standard econometric dodge: using lagged values of slow-moving variables as instruments. But this cannot be a serious solution to the problem. The causality issue points to a deeper question: Do cross-country regressions define a meaningful surface along which countries can move back and forth at will? If this is the idea, what mechanism could underlie such a surface? Brock and Durlauf call such a regression a “model.” I suppose in a statistical sense it is. But an economic model should have some internal structure; its causal arrows should rest on some sort of behavioral mechanism, and that seems to be missing in this literature. I think I had this prejudice even before cross-country regressions became fashionable. I thought of growth theory as the search for a dynamic model that could explain the evolution of one economy over time. There were no explicit crosssectional implications. Were there implicit ones? Certainly, and my comments bear on the question of what they might be.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/20440239b65f6da707752ad6b0174b56e5d2f801

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Citations in the corpus

Trade Liberalisation and Economic Performance: An Overview (2004, unknown): “Solow (2001) also makes the same point and it is the starting point for what follows.”
Religion and economic performance (2005, background): “Solow (2001) questioned the role of the many right-hand-side variables that have been included in the long-run growth literature and instead argued for focusing on national differences in the level and growth of total factor productivity or TFP (i.e., Aelt) across countries as the left-hand-side…”
The dynamic links between CO2 emissions, economic growth and coal consumption in China and India (2013, background): “Solow [26] suggested that an economic model should be dynamic in nature in order to observe the evolution of economic behaviour over time.”
A Survey Of Recent Developments In The Literature Of Finance And Growth (2008, background): “As Solow (2001) proposes, while a group of economies may share some common features each has its own distinctive characteristics.”
Financial liberalization, financial sector development and growth: Evidence from Malaysia (2007, unknown): “As Solow (2001) proposed, a group of economies may share some common features but each has its own distinctive characteristics.”
Aid and Development (2006, background): “17 For a pertinent cautioning set of observations see Solow (2001). literature continues to be highly influential in shaping common perceptions about the significance and impact of foreign aid.”