Abstract
There are two sources of inconsistency in existing cross-country empirical work on growth: correlated individual effects and endogenous explanatory variables. We estimate a variety of cross-country growth regressions using a generalized method of moments estimator that eliminates both problems. In one application, we find that per capita incomes converge to their steady-state levels at a rate of approximately 10 percent per year. This result stands in sharp contrast to the current consensus, which places the convergence rate at 2 percent. We discuss the theoretical implications of this finding. In another application, we perform a test of the Solow model. Again, contrary to prior reults, we reject both the standard and the augmented version of the model.
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Caselli, F., Esquivel, G. & Lefort, F. Reopening the convergence debate: A new look at cross-country growth empirics. J Econ Growth 1, 363–389 (1996). https://doi.org/10.1007/BF00141044
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DOI: https://doi.org/10.1007/BF00141044