Testing the Validity of the Solow Growth Model: Empirical Evidence from Cross-Country Panel Data

  • Chigozie Nelson Nkalu Department of Economics, University of Nigeria, Nsukka Enugu State, Nigeria
  • Richardson Kojo Edeme Department of Economics, University of Nigeria, Nsukka Enugu State, Nigeria
  • Queen O. Chukwuma Department of Economics, University of Nigeria, Nsukka Enugu State, Nigeria
Keywords: Solow Model, Cross-Country, Panel OLS, Growth Theories, Output-side of RGDP.

Abstract

This study seeks to test for the validity of the Solow growth model using cross-country panel data. Panel OLS analysis was adopted following an extensive review of recent and related literature with output-side of the real GDP as the dependent variable with other variables like population, capital stock and employment as the independent. However, population and capital stock are positively impacting the output with statistically significant value, while employment is not an important variable in the model even though it exhibits a negative and statistically significant effect to the output. In conclusion, the estimation result conforms the postulations of the basic Solow and augmented Solow growth model thereby validating the Solow model across-countries.

References

Barro, R. J., Mankiw, G. N. and Sala-I-Martin, X. (1995). Capital Mobility in Neoclassical Models of Growth, American Economic Review, 85, 103 – 15.
Ding, S. and Knight, J. (2009). Can the augmented Solow Model explain China’s remarkable economic growth? A Cross-Country Panel Data Analysis. Journal of Comparative Economics, 37, 432-452.
Duffy, J. and Papageorgiou, C. (2000). A Cross-Country Empirical Investigation of the Aggregate Production Function Specification. Journal of Economic Growth, 5, 87-120.
Durlauf, S. N., Kourtellos, A. and Minkin, A. (2001). The local Solow growth model. European Economic Review, 45, 928 – 940.
Easterly, W. and Levine, R. (2001). It is not factor Accumulation stylized facts and growth models. Working Papers Central Bank of Chile.
Hoeffler, A. (2002). The augmented Solow model and the African growth debate. Oxford Bulletin of Economics and Statistics, 64, 135 – 158.
Llerena, P., and Lorentz, A. (2004). Alternative Theories of Economic Growth and Co-Evaluation of Macro-Dynamics and Technological Change: A Survey. Laboratory Economics and Management (LEM), Working Paper Series.
Lucas, R. (1988). On the Mechanics of Economic Development, Journal of Monetary Economics, 22, 3–42.
Mankiw, N. G., Romer, D., and Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth, Quarterly Journal of Economics, 58, 407–437.
Milton, B. F., Ricardo, G. S., and Eliezer, M. D. (2005). The Empirics of the Solow Growth Model: Long-term evidence. Journal of Applied Economics, Vol. 8(1), 31-51
Murthy, V. N. and Chien, I. (1997). The Empirics of Economic Growth for OECD Countries: Some New Findings. Economics letters, 55, 425 – 429.
Sumer, K. K. (2012). Testing the Validity of Economic Growth Theories with Seemingly Unrelated Regression Models: Application to Turkey in 1980-2010. Applied Econometrics and International Development, 12(1), 63 – 72.
Published
2018-11-11
How to Cite
Nkalu, C. N., Edeme, R. K., & Chukwuma, Q. O. (2018). Testing the Validity of the Solow Growth Model: Empirical Evidence from Cross-Country Panel Data. American Economic & Social Review, 3(1), 18-22. https://doi.org/10.46281/aesr.v3i1.197