Contents

Abstract 936

Keywords 936

1. Introduction 937

2. VariationsontheNelson-Phelpsmodel 940

3. Some microfoundations based on the diffusion model of Barro and Sala-i-

Martin 944

4.

5. Empirical evidence 948

5.1. Measurementoftotalfactorproductivity 948

5.2. Model specification 953

5.3. Results 954

5.3.1. Base specification 954

5.3.2. Average human capital levels 956

5.3.3. Conditioning on country characteristics 956

6. Model prediction 959

6.1. Model forecasting 959

6.2. Negative catch-up countries 960

7. Conclusion 964

References 965

Very helpful comments were received from Richard Dennis, Rody Manuelli, Chris Papageorgiou, and seminar participants at LSU, USC, and the SIEPR/FRBSF Conference on Technical Change. Edmund Chiang provided excellent research assistance. The opinions in this paper are the author's own, and do not necessarily reflect those of the Federal Reserve Bank of San Francisco, or the Board of Governors of the Federal Reserve. We thank the C. V. Starr Center at NYU for technical assistance.

² Corresponding author.

Handbook of Economic Growth, Volume 1A. Edited by Philippe Aghion and Steven N. Durlauf © 2005 Elsevier B.V. All rights reserved

DOI: 10.1016/S1574-0684(05)01013-0