Conditional Convergence Model Research Articles

Spatial growth and convergence in Indian agriculture

AbstractThe economic growth convergence between advanced nations and the rest of the world has been found to reduce global income inequality. However, less is known about convergence within nations, especially in developing economies with substantial regional heterogeneities. Using the neoclassical framework, this study tests for farm income convergence in India, where agriculture employs over 200 million workers. Household farm income is estimated in 599 districts using three pan‐India situation assessment surveys (2003, 2013, and 2019). The conditional convergence model—augmented to capture spatial spillovers—shows farm incomes are converging across Indian districts but at slower rates in recent years and among farmers in the left‐tail of the income distribution. Irrigation infrastructure, crop diversification, and distance to the urban market explain farm income growth, and hence, spatial income disparities. Returns to these factors are high for middle‐income farmers than for the rich or poor. Spatial spillovers, likely from technological change, captured in residuals also had a positive impact on farm incomes. Results remain unchanged when farm income was replaced by its value added. Connecting the poorest to the markets, strengthening infrastructure and promoting diversification for the middle‐income groups, and nudging high‐income farmers toward value chains could help equitable economic development.

Bottom-Up Convergence? Explaining Uneven Income Growth in the New South

abstract: The southeastern United States has experienced rapid economic and population growth relative to the stagnation and decline of established manufacturing regions. The Rust Belt-Sun Belt literature has relied on a range of factors to explain southern growth (e.g., low wages, regional amenities, technological advances, market proximity, and the Civil Rights Movement). More recent work has cast growth in terms of bottom-up convergence and providing a conceptual framework consistent with the region's experience as the recipient of northern capital seeking a low-cost region. Within the region, uneven development remains. While the neoclassical framework can explain regional capital inflows, questions remain regarding how local and spatial contexts influence the trajectories of individual southern economies. To address these issues, this paper utilizes a conditional convergence model to explain southeastern county-level growth from 1990 to 2018 to understand how the balance of neoclassical processes and localized factors have affected the region's growth. Results highlight a transition away from low-cost manufacturing toward an increased importance of new, knowledge economy sectors. While new economy sectors are identified as significant drivers, results also suggest future challenges for sustained growth due to a suburbanized growth pattern, weak spillover effects, and a lack of urbanization economies.

Productivity effects of trade in natural resources—comparison with mechanisms of technological specialisation

AbstractThis paper compares two alternative growth paths, assessing the effects on productivity of specialisation in natural resources (NR) and in technologically advanced products. The empirical analysis exploits product‐level export data for 109 developing and 51 developed economies over the period 1996–2018. We document two distinct types of specialisation, based on exports either of natural resources or of technological products, and compare their role in labour productivity growth by GMM estimation of a conditional convergence model. In general, natural resource exports weakly slow down growth but we find that the type of resources exported is important: Metals enhance productivity catch‐up and can stimulate growth in developing countries. Technological specialisation, especially in products typical of the Fourth Industrial Revolution, reinforces productivity growth but does not affect natural resources–productivity growth relationship.

Economic Development and Convergence In Sumatra Island, Indonesia

The island of Sumatra, one of the largest contributors to the Indonesian economy, has experienced increased economic growth from time to time, but the acceleration of growth from each province has a different pace. This study aims to analyze the development and convergence of real per capita income that occurred on the island of Sumatra from 2011-2020, using panel data from 10 provinces in it. The novelty of this study incorporates Klassen's analysis as an effort to provide more concrete recommendations as well as the calculation of the half-life value per province which illustrates the convergence speed of each region. This can support the strength of the recommendation. We also divide the two observation periods, namely during normal conditions, and include 2020 as the year the economic shock occurred to compare changes in the convergence rate. Klassen's typology of economic development on the island of Sumatra for the 2016-2020 period shows a shift in the Riau Island Province towards being depressed and Bangka Belitung in the lagging zone. Meanwhile, Aceh Province is getting closer to the potential zone line. The level of inequality from the average value of the Williamson index is classified as moderate and during the year of observation shows an increase in value indicating convergence. The Covid-19 pandemic has reduced inequality, But on the other hand, the pandemic has also caused a decrease in real income in all the provinces observed, which means that welfare has decreased. The half-time value of each province implies economic stagnation that will occur in depressed developed regions and opens up opportunities for underdeveloped regions to spur growth in their real per capita income. In measuring the convergence itself, there was a convergence of real income per capita on the island of Sumatra. In other words, the conditional convergence model has a relatively higher convergence speed than the absolute convergence model. As an implication of the study, efforts to equalize per capita income on the island of Sumatra can be accelerated by spurring economic growth, HDI, and the distribution of gross fixed capital in areas that are in quadrants 3 and 4. Policies in eradicating poverty are a booster in accelerating the convergence process.

Is China’s Natural Gas Consumption Converging? Empirical Research Based on Spatial Econometrics

Excessive regional differences in energy consumption have led to inequality and energy poverty. It is essential to clarify the factors of energy consumption convergence to solve this problem. We use the spatial convergence model to analyze the convergence characteristics and conditions of China’s natural gas consumption from 2005 to 2017. The results of spatial absolute convergence show that there is absolute convergence of natural gas consumption in China, and the economic competition among provinces slightly hinders the convergence. Furthermore, based on the spatial Durbin model and the spatial conditional convergence model, we found that insufficient pipe network construction and the price difference caused by provincial borders are the main factors hindering the flow of natural gas, which also restricts the spatial convergence of natural gas consumption. The development of the tertiary industry and the improvement of purchasing power will help accelerate the convergence of natural gas consumption. This research not only evaluates the spatial convergence of China’s natural gas consumption for the first time, but also provides an analytical idea for formulating policies to eliminate poverty in energy consumption.

Performance and Poverty Convergence in North Sumatra

North Sumatra is one of the growth centers in Indonesia. However, its number of poverty is one of the highest nationally. This study aimed to see the performance and prove whether there is a convergence of poverty in North Sumatra Province during the years 2011-2021. The analytical method used included quantitative descriptive analysis. Through the Klassen quadrant which was divided into two periods, it can be seen that some regions have moved quadrants and some other regions have moved towards quadrant lines at different levels. The situation showed serious inequality in some areas that were in quadrant 4. The results of the Williamson index showed that the degree of inequality in poverty levels between regions tended to decrease, although there has been an increase in several years of observation. Through the sigma convergence test, it was strongly indicated that there was a dispersion of poverty levels between regions towards one common ground. It has been further confirmed by the absolute beta convergence test. Real income per capita and RLS that included in the conditional convergence model have proven to accelerate the process of poverty convergence between regions in North Sumatra.

The Nexus between External Debt and Growth Convergence: Evidence from Asian Countries

This paper aims to investigate the relationship between growth and external debt in selected Asian economies during the period from 2000 to 2019. To this aim, panel data collected from the World Development Indicators (WDI) of the World Bank are analyzed by the conditional beta convergence framework. Three indicators of external debt (namely total debt service, debt stock and public and publicly guaranteed debt service) are incorporated in the model regressing the average growth rate of income on the natural logarithm of the initial level of GDP per capita. Results of the fixed effect estimations show an inverse relationship between external debt ratios and economic growth. The role of external debt in the convergence process is further examined by including debt interaction terms in the conditional convergence model. We found that a higher debt service level is associated with a higher rate of convergence. These findings reveal that over the past two decades the economic convergence among Asian countries has been much debt-led. Our findings inform policymakers of the effectiveness of government borrowings as a source for economic growth.

Contribution of tourism to economic convergence in the European Union member states

The main objective of this paper is to determine whether tourism contributes to the economic convergence in the EU member states. The starting point of the analysis is the theoretical concepts of σ-convergence and (conditional) β-convergence. For the purpose of examining the relationship between tourism and σ-convergence in the long and short term, the cointegration test is used. Additionally, panel analysis is used for testing the model of conditional convergence. In this model, tourism as a conditional factor is operationalised by monetary indicators (consumption components and capital investments) as well as by a non-monetary one (direct employment) based on the tourism satellite account methodological framework. The model also tests a range of economic, social and ecological impacts on tourism and the economic convergence. The results proved that, although there is a long-term and short-term relationship between tourism and the economic growth convergence, tourism does not contribute to the economic convergence in the European Union member states, at least not to the extent that was expected.

Predicting the Water Rebound Effect in China under the Shared Socioeconomic Pathways.

The rebound effect exists widely in the fields of energy, irrigation, and other resource utilizations. Previous studies have predicted the evolution of different resource utilizations under the shared socioeconomic pathways (SSPs), but it is still unclear whether total water use has a rebound effect. This study uses the SSPs as the basic prediction framework and evaluates the water resources and economic status of the provinces in China using the hydro-economic (HE) classification method. Then, combined with the SSPs scenario setting parameters, the conditional convergence model and the method recommended by the Food and Agriculture Organization of the United Nations (FAO) are used to simulate the changes in water use efficiency of the different provinces in China under different scenarios. Based on the future GDP forecast data of China’s provinces, combined with the forecast of water use efficiency changes, the total water use changes in China’s 31 provinces under different pathways from 2016 to 2030 are calculated. Among them, the future GDP data is predicted based on the Cobb–Douglas production function and SSPs scenario settings. Using a comprehensive evaluation of the evolution of the efficiency and the total amount, this study reveals whether there is a rebound effect. The results showed that with the continuous growth in the water use efficiency, the total water use had a “U” type trend, which indicated that there was a rebound effect in the total water use of China under the different SSPs. Based on this information, this study proposes some suggestions for irrigation water-saving technologies and policies.

Does economic convergence hold? A spatial quantile analysis on European regions

This paper investigates differences in economic growth determinants for 187 regions across 12 European countries. The study focuses on a period of increasing inequalities including the peak of global recession (1981–2009). The conditional convergence model is estimated, removing the assumption of linearity, by using a spatial quantile regression. Spatial quantile results are used for the identification of groups of regions that share a common path in terms of economic growth determinants. This approach allows us to analyse if different growth performances may cause disparities across regions. The empirical evidence shows how European regions are characterized by different convergence rates as well as heterogeneity in the effect of investments, population growth, human capital, and spillovers. Besides, convergence tends to be higher for the European regions that grow slower, producing a stronger reduction of disparities between these regions. This last outcome highlights how EU regions are different in their economic performance, pointing out the need for ad hoc policies.

Prediction of Technological Change under Shared Socioeconomic Pathways and Regional Differences: A Case Study of Irrigation Water Use Efficiency Changes in Chinese Provinces

Technological changes in water use efficiency directly influence regional sustainable development. However, few studies have attempted to predict changes in water use efficiency because of the complex influencing factors and regional diversity. The Chinese Government has established a target of 0.6 for the effective utilization coefficient of irrigation water, but it is not clear how the coefficient will change in different provinces in the future. The purpose of this study is to predict irrigation water use efficiency changes using a conditional convergence model and combined with the shared socioeconomic pathways (SSPs) scenario settings and hydro-economic (HE) classification to group 31 Chinese provinces by their different economic and water resources conditions. The results show that the coefficient exponentially converges to 0.6 in half the provinces under SSP1 (sustainability), SSP2 (middle of the road), and SSP5 (conventional development) by 2030, whereas SSP3 (fragmentation) and SSP4 (inequality) are generally inefficient development pathways. HE-3 provinces (strong economic capacity, substantial hydrological challenges) achieve the greatest efficiency improvements (with all coefficients above 0.6), and SSP1 is a suitable pathway for these provinces. HE-2 provinces (strong economic capacities, low hydrological challenges) have relatively low efficiency because they lack incentives to save water, and SSP1 is also suitable for these provinces. For most HE-1 provinces (low economic capacity, low hydrological challenges), the coefficients are less than 0.6, and efforts are required to enhance their economic capacity under SSP1 or SSP5. HE-4 provinces (low economic capacity, substantial hydrological challenges) would improve efficiency in a cost-efficient manner under SSP2.

Empirical Analysis of Human Capital Convergence in Indonesia

This research analyzes the convergence hypothesis that applied to human capital which is one of important factor for economic development. This model applied to analyze the condition of provinces in Indonesia that have different conditions of human capital between regions for 33 provinces in Indonesia for two period between 2004 to 2010 and 2010 to 2016. This study uses data panels in estimating with fixed effects model as the best model choice. The result of the analysis for sigma convergence model is a decrease of global dispersion of human capital growth in Indonesia for the both periods. The results of beta convergence confirm the existence of absolute and conditional convergence model for the both periods. The determinants of human capital convergence in first period are economic growth, poverty, illiteracy, access to sanitation, access to clean water, number of health centers, and number of universities. Meanwhile different conditions are shown in the second period where the determinants of conditional convergence of human capital are determined only by economic growth, poverty, and sanitation access.

Comment on “Changing International Financial Architecture: Growing Chinese Influence?”

Comment on “Changing International Financial Architecture: Growing Chinese Influence?”

Vaccination and GDP Growth Rates: Exploring the Links in a Conditional Convergence Framework

Summary Vaccination rates vary significantly across countries, and the intensity of vaccination programs is a matter of public choice, infrastructure limitations, budget constraints, and many other factors. The link between better health and better economic performance is by now well established, and many vaccines have been shown to generate significant ROI in a classical cost-benefit framework. To our knowledge, the longer term macroeconomic benefits of improved vaccination programs have not been estimated. We modify the standard conditional convergence model to account for changes in vaccination rates across time and countries, and use the modified model to estimate the macroeconomic gains from improved vaccination rates, using the DTP vaccine as a proxy for vaccination programs generally. We find evidence to suggest economically and statistically significant and sustained increases in the GDP growth rate associated with lagged increases in vaccination rates; furthermore, we find these effects increasing over time. We find that investments of the sort made by the Global Alliance for Vaccination and Immunization (Gavi) are linked to measurably higher DTP rates, and we estimate the returns to such investments as at least 12:1. For countries on the threshold of graduating from Gavi, these results suggest that much is at stake: reducing investment in vaccination could reverse both the public health improvements and tangible economic benefits associated with ongoing improvements in vaccination rates.

The Analysis of Income per Capita Convergence on ASEAN Plus Three (APT) Countries

The main objective of this study is to test the convergence of income per capita in APT countries through three models: absolute convergence, conditional convergence and sigma convergence. Regression analysis of panel data from 13 APT countries during the period of 2001-2014 is used to analysed to study problem. In absolute convergence model, the growth of real GDP per capita and initial real GDP are used as the variables, meanwhile, 8 variables such as the growth of real GPD per capita, initial real GDP per capita, labor force ratio, value added in agricultural sector, value added in industrial sector, terms of trade, foreign direct investment and internet users ratio are analyzed in conditional convergence model. According to the Solow model, the economies of the countries will converge in which the growth of income per capita of developing countries will be higher than those of developed countries. The economies will be convergent if the countries tend to move to a similar steady state resulting in smaller gap between the countries. Based on the results of absolute convergence and conditional convergence models, APT countries is converging with the rate of 2% and 2.2%. This is consistent with the results of sigma convergence model that shows a declining trend in the dispersion of real GDP per capita in APT regions. The growth of real GDP per capita is influenced by initial GDP per capita, labor force ratio, value added in agricultural sector, value added in industrial sector, terms of trade, foreign direct investment and internet users ratio. Developed countries such as Singapore, Brunei Darussalam and South Korea experience the impact of high real GDP per capita growth. On the contrary, Indonesia, Laos, Vietnam and The Phillipines undergo the impact of low GDP per capita growth.

The Analysis of Income per Capita Convergence on ASEAN Plus Three (APT) Countries

The main objective of this study is to test the convergence of income per capita in APT countries through three models: absolute convergence, conditional convergence and sigma convergence. Regression analysis of panel data from 13 APT countries during the period of 2001-2014 is used to analysed to study problem. In absolute convergence model, the growth of real GDP per capita and initial real GDP are used as the variables, meanwhile, 8 variables such as the growth of real GPD per capita, initial real GDP per capita, labor force ratio, value added in agricultural sector, value added in industrial sector, terms of trade, foreign direct investment and internet users ratio are analyzed in conditional convergence model. According to the Solow model, the economies of the countries will converge in which the growth of income per capita of developing countries will be higher than those of developed countries. The economies will be convergent if the countries tend to move to a similar steady state resulting in smaller gap between the countries. Based on the results of absolute convergence and conditional convergence models, APT countries is converging with the rate of 2% and 2.2%. This is consistent with the results of sigma convergence model that shows a declining trend in the dispersion of real GDP per capita in APT regions. The growth of real GDP per capita is influenced by initial GDP per capita, labor force ratio, value added in agricultural sector, value added in industrial sector, terms of trade, foreign direct investment and internet users ratio. Developed countries such as Singapore, Brunei Darussalam and South Korea experience the impact of high real GDP per capita growth. On the contrary, Indonesia, Laos, Vietnam and The Phillipines undergo the impact of low GDP per capita growth.

Income convergence in India: evidence from nonparametric panel data

PurposeThe purpose of this paper is to investigate convergence hypothesis in a balanced panel of 22 Indian states for the time period of 1980-81 to 2010-11 by applying nonparametric model setting in a panel framework.Design/methodology/approachThe present study uses nonparametric and semi-parametric panel data methods to test the absolute and conditional convergence, respectively, and examines the income convergence using nonparametric panel data methods with state specific effects taken into consideration. These models are being estimated by the iterative process for a balanced panel of state wise per capita income and other conditioning variables for the time period of 1980-81 to 2010-11. For removing the fixed effects, the authors follow within transformation procedure according to the feasibility of the problem. Since convergence is estimated by regressing dependent variable on initial level of independent variable (as growth rate of income and per capita income in this case). So using usual transformation for removing the fixed effects is not feasible because by doing so the authors may end up with singular matrices on both sides of the regression model.FindingsThe results reject the null of parametric specification for both absolute as well as conditional convergence model. As to the outcome of the empirical analysis, the findings reveal that the Indian states are diverging in absolute sense and converging on conditional basis. Convergence happens to be consistent and conditional upon public expenditure, power generation share of primary and tertiary sector to Gross State Domestic Product.Originality/valueThe originality of the study is in its application of advanced methodology to highlight the model misspecifications while testing the convergence hypothesis in earlier literature.

Is Corruption Efficiency-Enhancing? A Case Study of Nine Central and Eastern European Countries

We investigate the role of corruption in the business environment in explaining the efficiency of within-sector production factor allocation across firms in nine Central and Eastern European (CEE) countries in 2003-2012. Using a conditional convergence model, we find evidence of a positive relationship between corruption growth and both labour and capital misallocation dynamics, once country framework conditions are controlled for: this link is larger the smaller the country, the lower the degree of political stability and civil liberties, and the weaker the quality of its regulations. As input misallocation is one of the determinants of productivity growth, we further show that the correlation between changes in corruption and TFP growth is indeed negative. Our results also hold when we tackle a possible omitted variable bias by instrumenting corruption with two instrumental variables (the percentage of women in Parliament and freedom of the press). In conclusion, targeted action against corruption in the CEE region would be efficiency-enhancing.

North African countries’ production and export structure: towards a diversification and export sophistication strategy

ABSTRACTThe North African countries’ (NACs) production and export structure suffers from double constraints: insufficient diversification and weak sophistication. This study assesses the impact of diversification/sophistication variables on growth in the NACs and verifies that the current export structure is indeed a constraint to economic development. We estimate a growth model as a Barro's regression (conditional-convergence model) using panel data. The factors that determine export diversification and sophistication suggest which levers and actions would firstly allow NACs to diversify their exports to higher added-value products and secondly take the existing products to a higher level of sophistication. Our recommendations highlight the role of various policies and stakeholders.

Survey of the Industrial Concentration and Price-cost Margin of the Indonesian Manufacturing Industry

ABSTRACTThis research investigates trends and conditional convergence of industrial concentration and price-cost margin in 410 subsectors of the Indonesian manufacturing industry. This study uses firm (establishment) level survey data provided by the Indonesian Bureau of Central Statistics (BPS) in the period 1980–2011. The conditional convergence model is employed using four-year intervals. This research finds that the industrial concentration and price-cost margin are relatively high for most of the subsectors. Moreover, the Indonesian manufacturing industry is classified as a tight oligopoly structure. This research also reveals that the industrial concentration and price-cost margin for all subsectors tend to converge to the same value in the long run. The competition law supports the convergence of the industrial concentration and price-cost margin for the subsectors. This research concludes that the higher industrial concentration can create a higher market power in the industry.