Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212061 
Authors: 
Year of Publication: 
2007
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 3/2007
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This paper builds on the literature on growth in searching for explanations for the divergent growth performance between the EU countries and the United States.We emphasise the role of R&D investment and perhaps different degrees of elasticity of substitution between capital and labour.We estimate two different production functions, namely Cobb-Douglas and CES specifications, with physical capital, a measure of labour, and residual 'technical trend' as inputs.Our first finding is that in many ICT-producing and using countries such as Denmark, Finland, Ireland, Sweden and the United States technical progress has been accelerating during the past decade.Secondly, this speeding up of technical progress has been associated with R&D investment and perhaps with increasing elasticity of substitution between capital and labour.Hence, our results suggest that there is no growth paradox in Europe: the R&D factor and the elasticity of substitution between capital and labour which have been known to be important factors of economies' growth potential, actually explain a significant part of the divergent growth performance of the European economies as well.
Subjects: 
endogenous growth
panel data estimation
production function
R&D
technical progress
elasticity of substitution
JEL: 
E22
E23
O51
O52
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-350-6
Document Type: 
Working Paper

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