Externalities and Growth Accounting

Jess Benhabib, Boyan Jovanovic

NBER Working Paper No. 3190
Issued in December 1989
NBER Program(s):Economic Fluctuations and Growth Program

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.

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Document Object Identifier (DOI): 10.3386/w3190

Published: The American Economic Review, Vol. 81, No. 1, pp. 82-113, (March 1991). citation courtesy of

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