Parameter Heterogeneity and Nonlinearities in the Aggregate Production Function: Investigating the Solow Growth Model with CES Technology
نویسندگان
چکیده
In this paper we examine whether nonlinearities in the aggregate production function can explain parameter heterogeneity in the Solow (1956) growth regressions. Nonlinearities in the production technology are introduced by replacing the linear Cobb-Douglas specification with the more general CES specification. We justify our choice of production function by showing that in the context of cross-country level regressions, we can reject the Cobb-Douglas over the CES aggregate production specification. Then, by using the endogenous threshold methodology of Hansen (2000) we show that the Solow model under CES implies robust nonlinearities in the growth process that are consistent with the presence of multiple regimes. JEL Classification: O40, O47
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