Why Do Growth Rates Differ? Cross Country Data

[Sapphire Capital]

Why Do Growth Rates Differ? Evidence from Cross-Country Data on Private Sector Production

JUHA KILPONEN
Bank of Finland - Research
MATTI VIREN
Bank of Finland - Research
--------------------------------------------------------------------------------
2008

Bank of Finland Research Discussion Paper No. 13/2008


Abstract:
We estimate a standard production function with a new cross-country data set on business sector production, wages and R&D investment for a selection of 14 OECD countries including the United States. The data sample covers the years 1960-2004. The data suggest that growth differences can largely be explained by capital deepening and an ability to produce new technology in the form of new patents. The importance of patents is magnified by the openness of the economy. We find some evidence of increasing elasticity of substitution over time, all though the results are sensitive to assumptions on the nature of technological progress.

papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1135113_code852818.pdf?abstractid=1135113&mirid=4