Solow vs. Solow: Machine Prices and Development
Boyan Jovanovic, Rafael Rob
NBER Working Paper No. 5871
Machines are more expensive in poor countries, and the relation is pronounced. It is hard for a Solow (1956) type of model to explain the relation between machine prices and GDP given that in most countries equipment investment is under 10% of GDP. A stronger relation emerges in a Solow (1959) type of vintage model in which technology is embodied in machines.