An Empirical Test of Endogenous Growth Model for Egypt

Abstract

Endogenous growth models attribute long-run growth to the accumulation of capital, enhancing labor force and technological advances. The study applied the Cobb-Douglas production function offered by Romer's endogenous growth model in Egypt using data from the World Bank over the period 1990-2022. A long-term cointegration relation is confirmed between the dependent variable real GDP, which is considered as a proxy for economic growth, and the independent variables, total factor productivity as a proxy for stock of knowledge, Real Gross Capital Formation as a proxy for capital stock and years of schooling as a proxy for labor stock. Altogether, they explain 97% of variations in real GDP. The results reveal that a 1% increase in each of the stock of knowledge and technology, capital and labor leads to a 0.04, 0.44 and 0.80 increase in real GDP, respectively in Egypt over the study period.. Which coincides with the economic theory.