6 - The Cobb–Douglas Regression as a Tool for Measuring and Explaining Economic Growth

Summary

This chapter describes a process in which a number of long-standing hypotheses about sources of economic growth came to be represented as a series of modifications to Solow’s basic neoclassical production function, which in turn led to attempts to test empirically these hypotheses using production function regressions. Particular attention is given to two empirical research programs that made use of variants of Douglas’s regression procedure: the literature on “embodied technical change” initiated by Robert Solow, and Zvi Griliches’s work measuring the causes of economic growth, both of which emerged in the late 1950s and early 60s. Griliches and Solow proposed empirically tractable ways of testing various hypotheses about causes of economic growth. Their proposals were attractive in part because they made use of an empirical procedure, production function estimation, that involved statistical methods that were coming to be the foundation of graduate training in econometrics, and because they were expressed in terms of the mathematical neoclassical theory that was becoming central to graduate training in economic theory.