Prospect of Long-Run Growth in Korea : Learning from Cross-Country Data

Abstract

Predicting long-run growth pats using the Solow-like growth formulas involves and inevitable problem : how to predict dynamic paths of the respective explanatory variables. This paper approacher this issue in the following four steps: 1) Estimate the relevant coefficients (elasticities) of explanatory variables from cross-country regressions; 2) Using cross-country data, estimate the general pattern of each explanatory variables as a (nonparametric) function of income per capita; 3) Estimate Korea's country-specific effects in the explanatory variables; 4) Using the above estimates, simulate the Korea's and explanatory variables' paths simultaneously.