Economic Growth Cross-Model Comparison

Abstract

This paper focuses on the topic of how an economy grows and what are the determinants that foster this development in the long run. To do this, we will work throughout the paper with 9 different economies with different characteristics in terms of elasticities, population growth rates or consumption patterns, and evaluate an empirical analysis by bringing the data to a Solow model and to an endogenous Ramsey model of economic growth. We establish the link between macroeconomic variables and estimate how changes in the assumptions can alter the rate at which we observe a country to develop by using econometric tools through Ordinary Least Squares and 2-Stage Least Squares. We will also study, from a probabilistic point of view, how the behaviour of a country has an impact on the attainment of the golden rule of savings derived by the Solow model and rely on the assumption that production functions will adopt the Cobb-Douglas specification.