Master's Culminating Experience
This study was conducted to comprehensively review established growth economics literature, analyze newly revised data sources, and reestimate generally accepted economic growth models using the revised data. Specific findings include the revalidation of the MRW model, discovery of a satisfactory alternative measure of human capital, sensitivity issues when performing Barro-style regressions, and data trends that may have an alarming impact on certain of the growth models.
Reestimation of the MRW model was found to be robust, and satisfactorily explains differences in productivity among nations. Additionally, human capital as measured by the literacy rate of the population was found to be as satisfactory as the secondary schooling participation rate used in the original investigation. Additional measures of human capital that were investigated including life expectancy and per capita educational expenditure were found to be unsatisfactory.
Reestimation of a Barro-style regression was found to be less satisfactory than the reestimation of MRW. The model was found to be highly sensitive to collinearity issues pertaining to sample and time selection. Barro-style models are an important addition to growth theory economics in that they attempt to extend the MRW model with the addition of certain other factors and should not be discounted. They are useful for establishing economic policies when dealing with specific grouping of countries, rather than the broad generalizations regarding policy that may be derived from the MRW model. From this investigation higher rates economic growth were found among countries with lower fertility rates, lower rates of inflation, and higher, although not the highest levels of democracy.
While no reestimation of any of the endogenous growth models was performed in this project, one empirical finding relating to knowledge production is of concern to both the exogenous and endogenous treatment of technological change. The finding that the rate of per capita knowledge production is declining is a finding that has negative implications for the future. To subscribers to the MRW model of economic growth this means that the time between shifts in total factor productivity will become greater. To subscribers of models incorporating endogenous technological innovation this poses a reduction in the rate of increasing complexity of knowledge, discouraging to the realization of increasing returns to scale.
(2002). An Investigation into the Sources of Economic Growth Differentials Among Nations. .