A Cross-Section Model of Economic Growth

GCF gross capital formation GNP gross national product N population r growth rate of GNP/N. After fitting this model to a cross section of 100 countries for 1966, they use the estimated coefficients to simulate a growth path of a typical economy. In this comment it will be shown that the simulation results depend critically on the quadratic sDecification of equation (1) .2 Although the estimation of equation (1) by Sommers and Suits gives satisfactory results, there is little empirical evidence for the declining range of the equation. This can easily be seen from the scatter diagram and the graph of the fitted equation (figure 1): GCF/GNP attains its maximum when GNP/N is $2,169. The sample, however, contains only 8 countries (out of 100) with a per capita income of more than $2,169. Except for the single case of the United States (GNP/N $3,763 and

Cross section (physics) · Econometrics · Economics · Growth model · Mathematical economics · Physics · Section (typography) · Computer Science · Economic Growth and Productivity