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JOURNAL OF APPLIED BUSINESS AND ECONOMICS
Determinants of Steady State Income: Is a Linear Specification Too Simple?
Author(s): Kathleen E. Odell
Citation: Kathleen E. Odell, (2012) "Determinants of Steady State Income: Is a Linear Specification Too Simple?," Vol. 13, Iss. 3, pp. 73 - 90
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This paper examines whether the Solow model of economic growth and steady state income is supported
by available cross-section data. The paper argues that while income per worker is correlated positively
with investment in capital (both physical and human) and negatively with population growth, a simple
log-linear empirical model derived from the Cobb-Douglas production function oversimplifies these
relationships. A nonlinear specification is presented as an alternative. Estimation of the nonlinear
specification shows that for the period 1960-2000, the strongest marginal effects of education occur in
countries where education levels are already relatively high.
