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Introduction to Modern Economic Growth other trading restrictions There is very well-documented home bias in consumption violating the identical homothetic preferences assumption Finally, most trade economists believe that conditional factor price equalization is not a good description of factor price differences across countries In view of all of these, the results from the Trefler exercise have to be interpreted with caution Nevertheless, this approach is important in showing how different data and additional theory can be used to estimate cross-country technology differences and in providing a cross-validation for the calibration and estimation results discussed previously 3.7 Taking Stock What have we learned? The major point of this chapter has not been the development of new theory Although we have extended the basic model of the previous chapter in a number of directions, if our interest were purely theoretical, we could have skipped the material in this chapter without much loss Our major objective in this chapter has been to see whether we could use the Solow model to have a more informed interpretation of cross-country differences and also use data in order to understand the strengths and shortcomings of the Solow growth model At the end of this brief journey, the message is somewhat mixed On the positive side, despite its simplicity, the Solow model has enough substance that we can take it to data in various different forms, including TFP accounting, regression analysis and calibration Moreover, each of these different methods gives us some idea about sources of economic growth over time and of income differences across countries On the negative side, however, no single approach is entirely convincing Each relies on a range of stringent auxiliary assumptions Consequently, no firm conclusions can be drawn The simplest applications of the Solow accounting framework suggest that technology is the main source of economic growth over time However, this conclusion is disputed by those who point out that sufficient adjustments to the quality of physical and human capital substantially reduce or perhaps even totally eliminate residual TFP growth The same debate is seen in the context of cross-country income differences; while some believe that accounting for differences in physical and human capital across countries leaves little need for technology 148