The seminal paper byMankiw, Romer, andWeil (1992) (henceforth MRW) is arguably the
reason for the fundamental change in the textbook presentation of the Solow model. MRW
use regression analysis to demonstrate that their specification of a human-capital-augmented
Solow model provides an excellent description of cross-country data. The MRW paper has
generated a large body of subsequent empirical research1 that discusses the robustness of
this result and, implicitly, the empirical relevance of the Solow model. The major counterevidence
comes from a paper by Klenow and Rodriguez-Clare (1997) (henceforth KRC), who
employ development accounting methods to show that differences in (residual) technology
rather than differences in the capital–output ratio are the major determinants of cross-country
income differences. The actual textbook treatment of this apparent contradiction is to present,
without much discussion, differences in factor accumulation and differences in ‘productivity’
(technology) as independent determinants of development that are emphasized by different
growth models. What has been neglected in the empirics of growth, and in recent textbook
presentations, is that the Solow model suggests otherwise.