Economic growth and returns to scale for reproducible factors

Abstract

A regression equation nesting a variant of Rebelo's (Journal of Political Economy, 99, 500–21, 1991) AK model with Solow's (1956) neoclassical model is developed. The null hypothesis implied by endogenous growth tests that individual countries face constant returns to the accumulation of reproducible capital and per capita incomes of these countries diverge against the alternative hypothesis implied by exogenous growth that individual countries face diminishing returns to the reproducible capital. These empirical results are more consistent with endogenous growth than exogenous growth when the regression model is examined with a large sample of countries including OECD countries.