The local Solow growth model

摘要

This paper generalizes the empirical analysis of the Solow growth model to account for country-specific heterogeneity. This generalization relaxes the assumption made in bulk of empirical growth studies that all countries possess identical aggregateproduction functions. Our empirical results indicate that there is substantial country-specific heterogeneity in the Solow parameters-heterogeneity that is associated with differences in initial income. We therefore conclude that the explanatory value ofthe Solow growth model is substantially enhanced by allowing for country-specific, i.e. local, production functions.