Exploring Economic Growth of OECD Countries: Basic Solow Model or Country Specific Technology-Augmented Solow Model?

Abstract

The basic Solow model that has been estimated empirically in many studies faces the problems of omitted variable bias and multicollinearity. This study uses a Bayesian nonlinear regression based on a panel data set of OECD countries for the period 1971-2019 to evaluate and compare two Solow models: basic and heterogeneous technology-augmented. The study discovers that the basic Solow model has a higher explanatory power for the economic growth of the OECD countries. This result supports the convergence hypothesis among developed country groups.