In this paper we are going to test Solow growth model on long-term data for Austria and the Netherlands. Our main point of interest will be how their growth dynamics were determined by foreign development. Our hypothesis is that the model is inconsistent with reality, since it omits effects from international trade and institutions. We have proved that a polynomial trend with a dummy variable after the oil shock in 1979 might be the best estimation for both countries. In both countries we found that there is some extra effect of international trade that cannot be explained through Solow framework. We have proved that the Solow growth model is inconsistent with the GDP post-war development of both Austria and the Netherlands.
Assessing Dutch and Austrian Economic Growth Within the Solow Growth Model Framework_ a Critical Approach ;...
Wimbledon Wisdom
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