Economic growth and economic development 144

Introduction to Modern Economic Growth data The implied values of β are similar, though the Adjusted R2 is somewhat lower Table 3.2 Estimates of the Augmented Solow Model MRW Updated data 1985 1985 2000 ln(sk ) 69 (.13) 65 (.11) 96 (.13) ln(n + g + δ) -1.73 (.41) -1.02 (.45) -1.06 (.33) ln(sh ) 66 (.07) 47 (.07) 70 (.13) Adj R2 78 65 60 Implied β 30 31 36 Implied α 28 22 26 No of observations 98 98 107 To the extent that these regression results are reliable, they give a big boost to the augmented Solow model In particular, the estimate of Adjusted R2 suggests that over (or close to) three quarters of income per capita differences across countries can be explained by differences in their physical and human capital investment behavior The immediate implication is that technology (TFP) differences have a somewhat limited role, confined to at most accounting for about a quarter of the cross-country income per capita differences If this conclusion were appropriate, it would imply that, as far as the proximate causes of prosperity are concerned, we could confine our attention to physical and human capital, and assume that countries have access to more or less the same world technology The implications for the modeling of economic growth are of course quite major 130