This paper examines whether the Solow growth model is consistent with the international variation in the standard of living. It shows that an augmented Solow model that includes accumulation of human as well as physical capital provides an excellent description of the cross-country data. The paper also examines the implications of the Solow model for convergence in standards of living, that is, for whether poor countries tend to grow faster than rich countries. The evidence indicates that, holding population growth and capital accumulation constant, countries converge at about the rate the augmented Solow model predicts.
Finance matters. The level of a country's financial development helps predict its rate of economic growth for the following 10 to 30 years. The data are consistent with...
Does finance affect economic growth?A number of studies have identified a positive correlation between the level of development of a country's financial sector and the rate of g...
This paper develops tests of inequality restrictions implied by conditional asset pricing models. The methodology is easy to implement, requires little knowledge of the conditio...
Traditional econometric models assume a constant one-period forecast variance. To generalize this implausible assumption, a new class of stochastic processes called autoregressi...
Every person approaches problems with the help of models. A model is simply an ordered set of assumptions about a complex system. Our world model was built specifically to inves...
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