An extension to the neoclassical growth model to estimate growth effects

Abstract

The neoclassical growth model was extended by Mankiw et al. (1992) to estimate the level-effects of human capital. We suggest a further extension to capture their permanent growth-effects. Time-series data from Fiji are used to show that the growth-effects of human capital, although small, are significant and specifications with growth-effects perform better.

Notes

¹ For simplicity, we suppress error terms in the equations and assume that they are N ∼ (0, σ²).