We reexamine several bodies of data on the growth of output, labor, and
capital, within the context of a model that admits the possibility of an
externality to the capital input. The model is an augmented version of Paul
Romer's (1987) reformulation of the Solow model. Unlike Romer, however, we
find no evidence of an externality to capital. This finding implies nothing
about the size of possible spillovers in the creation of knowledge because in
our model, causality runs exclusively from knowledge to capital.
*Published:
The American Economic Review, Vol. 81, No. 1, pp. 82-113, (March 1991).
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