Long-Run Growth Differences and the Neoclassical Growth Model

This paper shows that allowing factor income share differences across countries in a modified Solow model can imply differences in output growth rates across countries. Using cross-sectional data for 52 countries, an empirical illustration shows that the parameters of the modified model are intuitively plausible, jointly significant, and possess modest explanatory power (R-2 around 0.25). The paper emphasizes the methodological importance of simplifying assumptions on applied theory.