Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously

Is long-run economic growth exogenous? To address this question, we show that the empirical framework of Mankiw, Romer, and Weil (1992) can be extended to test any growth model that admits a balanced growth path, and we use that framework both to revisit variants of the Solow growth model and to evaluate simple alternative models of endogenous growth. To allow for the possibility that economies in our sample are not on their balanced growth paths, we also study the cross-sectional behavior of total-factor-productivity growth, which we estimate using alternative measures of labor's share. Our broad conclusion, based on both model estimation and growth accounting, is that long-run growth is significantly correlated with behavioral variables such as the savings rate, and that this correlation is not easily explained by models in which growth is treated as the exogenous variable. Hence, future empirical studies should focus on models that exhibit endogenous growth.

[1]  C. I. Jones,et al.  Why Do Some Countries Produce so Much More Output Per Worker than Others? , 1998 .

[2]  R. Barro,et al.  International Data on Educational Attainment Updates and Implications , 2000 .

[3]  Nazrul Islam,et al.  Growth Empirics: A Panel Data Approach , 1995 .

[4]  Danny Quah,et al.  The New Empirics of Economic Growth , 1998 .

[5]  H. Uzawa,et al.  Preference, production, and capital: Optimum technical change in an aggregative model of economic growth , 1965 .

[6]  David Cass,et al.  Optimum Growth in an Aggregative Model of Capital Accumulation , 1965 .

[7]  Tjalling C. Koopmans,et al.  On the concept of optimal economic growth , 1963 .

[8]  Alwyn Young,et al.  The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience , 1994 .

[9]  T. C. Edens,et al.  Economic Growth , 1957, The Journal of Economic History.

[10]  Peter J. Klenow,et al.  The Neoclassical Revival in Growth Economics: Has It Gone Too Far? , 1997, NBER Macroeconomics Annual.

[11]  B. Bosworth,et al.  Economic Growth in East Asia: Accumulation versus Assimilation , 1996 .

[12]  D. Weil,et al.  A Contribution to the Empirics of Economic Growth Author ( s ) : , 2008 .

[13]  Charles I. Jones,et al.  Time Series Tests of Endogenous Growth Models , 1995 .

[14]  F. Ramsey,et al.  THE MATHEMATICAL THEORY OF SAVING , 1928 .

[15]  Robert Summers,et al.  A NEW SET OF INTERNATIONAL COMPARISONS OF REAL PRODUCT AND PRICE LEVELS ESTIMATES FOR 130 COUNTRIES, 1950–1985 , 1988 .

[16]  R. Solow.  A Contribution to the Theory of Economic Growth , 1956 .

[17]  R. Lucas.  On the Mechanics of Economic Development , 1988 .

[18]  D. Gollin.  Getting Income Shares Right , 2002, Journal of Political Economy.

[19]  V. Elías.  Sources of Growth: A Study of Seven Latin American Economies , 1992 .

[20]  R. King,et al.  Transitional Dynamics and Economic Growth in the Neoclassical Model , 1989 .

[21]  R. Barro,et al.  Capital Mobility in Neoclassical Models of Growth , 1992 .