Empirical Estimation of the Solow Growth Model: A Panel Approach

Sammanfattning: This research examines the relevancy of Solow growth model in 20 OECD countries over the period 1971-2011. Following Mankiw-Romer-Weil (1992) and Islam (1995), I estimate both textbook and augmented Solow model. Along with OLS, estimation is carried out implementing both static panel and dynamic panel GMM carries out estimation. Results imply that appending human capital measure in augmented Solow model can better explain the international differences in levels of output per worker.Importantly, convergence rate is relatively stronger when growth is conditioned on workforce growth rate, rate of savings and human capital. Using efficient system GMM in dynamic panel, I have shown that speed of convergence is about 4.7 percent, which is twice than the standard consensus about convergence rate in literature.