Working Paper: NBER ID: w3541
Authors: N. Gregory Mankiw; David Romer; David N. Weil
Abstract: 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 model explains about 80 percent of the international variation in income per capita, and the estimated influences of physical-capital accumulation, human-capital accumulation, and population growth confirm the model's predictions. 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.
Keywords: economic growth; Solow model; human capital; cross-country variation
JEL Codes: O40; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher rates of saving (D14) | higher levels of income per capita (P17) |
| higher rates of population growth (J11) | lower levels of income per capita (E25) |
| human capital accumulation (J24) | estimated effects of saving and population growth align more closely with predictions of the augmented model (J11) |
| differences in saving and population growth rates (J11) | countries exhibit convergence in per capita income (F40) |