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Estimating and Testing the Multicountry Endogenous Growth Model

De Visscher, Stef; Eberhardt, Markus; Everaert, Gerdie


Stef De Visscher

Gerdie Everaert


We estimate Cobb-Douglas production functions that parameterize unobserved total factor productivity as a global technology process interacted with country-specific absorptive capacities. In contrast to the existing literature we do not require proxies for these absorptive capacities but instead estimate them as time-varying stochastic processes. Our implementation allows us to test the contrasting predictions of alternative growth models and our results for a panel of advanced economies support the multicountry endogenous growth model in that an enhancement in absorptive capacity raises a country's long-run productivity level but not its growth rate. This finding is confirmed in an extended model where we allow a set of policy variables (financial development, human capital, competition policy, and knowledge stock) to affect absorptive capacity, none of which induce permanent growth effects. The proxies for financial development and knowledge stock stand out for their significant level effects. JEL Classifications: O33, F43, F60, C23, C21 Keywords: Multicountry endogenous growth model, total factor productivity, absorptive capacity, common factor model, time-varying parameters, MCMC Highlights: • TFP is a global technology process with country-specific absorptive capacities; • Baseline specification: absorptive capacities are time-varying stochastic processes; • Extension: absorptive capacities are also a function of observed variables; • Absorptive capacity investments raise the level of TFP but no its growth rate.

Journal Article Type Article
Publication Date Apr 1, 2020
Journal Journal of International Economics
Print ISSN 0022-1996
Publisher Elsevier
Peer Reviewed Peer Reviewed
APA6 Citation De Visscher, S., Eberhardt, M., & Everaert, G. (2020). Estimating and Testing the Multicountry Endogenous Growth Model. Journal of International Economics,
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