The aggregate models used in studies of the sources of economic growth in developed
and developing countries are rough tools. Yet these studies point in the same
general direction. First, the major source of growth per worker in developing countries
is capital per worker; increased productivity of each unit of capital per worker
is of less significance. Second, the major source of growth per worker in developed
countries is increased productivity, with increases in capital per worker being relatively
unimportant. Accordingly, capital accumulation appears to have been more
important and technical progress less important as a source of growth in developing
countries than in developed countries.
In 1965, the Nobel prize winner John R. Hicks argued that econometric studies
of growth sources in Western countries understate capital formation’s contribution
to growth. Because many significant advances in knowledge are embodied in new
capital, its separation from technical progress may lead to underestimating its contribution.
Furthermore, accumulation of new capital is frequently offset by a decrease