Convergence Of Growth Rates Research Articles

Spatial dependence and regional income convergence in India (1981–2010)

In the 1990s, India undertook large scale market-based reforms. This was expected to bring about convergence in growth rates across different states. However, the bulk of empirical literature on India suggests that there has been increased divergence in the post reforms period. We re-examine the convergence debate of India’s economic growth and question the validity of existing estimates of convergence rates, most of which are based on either cross-section analysis or non-spatial panel data analysis. We provide the first estimates of convergence rates in India from spatial panel data models. Our analysis reveals a significant influence of neighbouring states’ growth on per capita income of Indian states. The impact of initial income on growth is much smaller than earlier anticipated once we control for spatial dependence. This suggests that many of the earlier estimates of convergence rates and the impact of initial income on growth may be inaccurate and biased. Our results confirm that the “β” convergence coefficient is positive and significant suggesting income divergence. In addition, we find evidence of spatial dependence among the states in India. Apart from the state’s own initial income, what matters is how rich or poor its neighbours are. This occurs even though the neighbours may have different growth drivers and lack a set of common public policies. This has implications for growth policy-making in India, especially due to the ongoing institutional changes underway in the country.

On the mechanism of international technology diffusion for energy technological progress

As a needed methodological complement to the existing large-scale complex policy modelling for energy technology diffusion, this paper contributes to an analytical exposition of the fundamental mechanism of international technology diffusion (ITD) for energy technological progress. We offer two different and complementary perspectives to explore the dynamics of energy technology diffusion and progress. We first develop a Solow-type efficiency-improving model of energy technological progress which is described by improvements in primary energy-augmenting efficiency. We further provide a Romer-type variety-expanding model of energy technological progress which is represented by the expansion of differentiated varieties of primary energy technology blueprints. Analysis based on two different models reaches consistent results: there are potential forces in the world economy – working through ITD – that pull individual countries to advance energy technology, ensuring a cross-country convergence in the growth rates of energy technology in the balanced growth path. While ITD plays a role in a cross-country convergence in technological growth rates, cross-country differences in the efficiency of undertaking indigenous research and the capacity of absorbing foreign technology spillovers would lead to a cross-country divergence in the absolute levels of energy technology.

On the Mechanism of International Technology Diffusion for Energy Technological Progress

As a needed methodological complement to the existing large-scale complex policy modelling for energy technology diffusion, this paper contributes to an analytical exposition of the fundamental mechanism of international technology diffusion (ITD) for energy technological progress. We offer two different and complementary perspectives to explore the dynamics of energy technology diffusion and progress. We first develop a Solow-type efficiency-improving model of energy technological progress which is described by improvements in primary energy-augmenting efficiency. We further provide a Romer-type variety-expanding model of energy technological progress which is represented by the expansion of differentiated varieties of primary energy technology blueprints. Analysis based on two different models reaches consistent results: there are potential forces in the world economy – working through ITD – that pull individual countries to advance energy technology, ensuring a cross-country convergence in the growth rates of energy technology in the balanced growth path. While ITD plays a role in a cross-country convergence in technological growth rates, cross-country differences in the efficiency of undertaking indigenous research and the capacity of absorbing foreign technology spillovers would lead to a cross-country divergence in the absolute levels of energy technology.

Growth and convergence of the OECD countries: A multi-sector production-frontier approach

Kumar and Russell (2002), Henderson and Russell (2005), and Badunenko, Henderson and Russell (2013) have proposed a production-frontier methodology to analyze the economic growth and the convergence of growth rates across countries. They see two main advantages to this methodology: (1) it reconstructs the world production frontier without relying on any particular (typically unverifiable) assumptions on any aspects of the growth process, and (2) it allows to decompose labor productivity growth into several parts. In this paper, I extend the previous approach by considering a multi-sector setting. This setting allows to propose a more realistic and complete country-level analysis, while keeping the same advantages as with the previous methodology. I also tackle the criticism of less reliable data at the sector level than at the country level by showing how the multi-sector approach can easily be adapted. I apply it to the OECD countries from 1995 to 2008. The results confirm the non-neutrality of technological change. I also find that capital accumulation plays the biggest role in the increase of output-labor productivity, while technological change and human capital accumulation also play an important role, but it is twice as small as capital accumulation. Interestingly, these results suggest the emergence of two groups: eastern and central European countries; and the EU15 and Korea. The two groups seem to diverge over time.

Growing Through Trade: The Role of Foreign Growth and Domestic Tariffs

This paper studies the role of trading partner’ growth and a domestic import tariff in the possibility of growing through trade. To this purpose, a Ricardian model is developed in which a backward economy seeks to increase its long-run growth rate simply by trading with a faster growing partner. It is found that domestic growth may be either negatively affected or unaffected by a domestic import tariff, while it is always positively impacted by foreign growth. Furthermore, convergence in growth rate can emerge both with an import tariff and under free trade. Ours results are consistent with the empirical evidence.

Trends in Public Financing of Human Development: Human Development's Effect upon Regional Inequalities: A Study from 1993 to 2007

AbstractThe advent of globalization in India has led to an increase in regional disparities across India in the past 20 years. During this span of time, these regional inequalities have assumed themselves into a major problem for the development strategy of the country. The Convergence Hypothesis (Barro & Sala‐i‐Martin, 1991), based on neoclassical paradigms, emphasizes that when the growth rate of an economy accelerates, initially some regions with better stock of resources would grow faster than other regions, but after a period of time, on account of law of diminishing returns to capital, there will be a convergence of growth rates across different regions. But in the case of India, the results have been starkly different. Policymakers and academicians have suggested that one of the most effective ways of reducing these inequalities has been increasing the growth of social infrastructure across all states in the country. The paper tries to establish the relationship between the financing of human development by different state governments and its impact upon regional inequalities. The results suggest that the increase in public expenditure on education and health endowments in the country definitely have a significant impact upon the regional inequalities, but with a larger lag of at least 10 years.

The role of technology spillovers in convergence

PurposeThe purpose of this paper is to evaluate the role of human capital technology spillovers across countries in converging their growth rates.Design/methodology/approachThis paper develops a closed form mathematical endogenous growth model and applies it to a small open economy using simulation and calibration techniques.FindingsThe paper finds that human capital technology spillovers play an important role in convergence in growth rates across countries regardless of tax policy and that there will be non‐convergence in levels if saving rates are differentially distorted across countries because of taxes. In addition, the exploration of the optimal tax reveals that such a structure is a consumption tax.Research limitations/implicationsThis paper implies that higher levels of human capital are important in attaining higher levels of per capita income.Originality/valueThis paper shows that some implications for the endogenous growth model are equivalent to those from the Solow model. This implies that some empirical tests commonly used will not resolve which model is more appropriate.

International status seeking, trade, and growth leadership

Abstract We study a two‐country endogenous growth model where the utility of agents in developing countries is affected by consumption gaps with advanced economies. International status seeking tends to revert growth differentials in favour of the developing country. Preferences with endogenous status desire generate convergence in growth rates in the presence of structural gaps and convergence in income levels if productivity differences disappear. This process is driven by declining terms of trade and faster capital accumulation of the status seeker. The model predictions are shown to be consistent with the stylized facts that characterized the growth performance of East Asian economies.

Cross-Country Income Differences and Technology Diffusion in a Competitive World

This paper develops a new open-economy endogenous growth model where technology diffusion allows for a stable and non-degenerate world income distribution. In accordance with the empirical literature, I find that country characteristics such as the social infrastructure, the degree of openness, the investment rate, population growth, the level of human capital, or growth policies such as subsidies to innovation investments explain a country's position in the eventual world income distribution. Club convergence in growth rates can be traced back to a country's openness and to a minimum required level of human capital.

Regional Inequality in China, 1978-2006

Using the most recent statistical data, two U.S.-based geographers document the changes and level of regional inequality in China for the period 1978-2006, in order to shed light on whether recent government efforts toward inequality reduction have had observable effects. The paper reveals the spatial dynamics that underlie regional inequality by decomposing interprovincial inequality into its interregional and intraregional components, and investigating the growth trajectories of regions and provinces. The authors demonstrate that interprovincial inequality declined during the 1980s, increased in the 1990s, was relatively stable from the late 1990s to 2004, and has declined thereafter. Through closer analysis, they show how the trend in interprovincial inequality up to 2004 has been shaped by countervailing patterns in (declining) intraregional inequality and (increasing) interregional inequality. Since 2004, however, the study reveals that both interregional and intraregional inequalities have declined, reflecting convergence in growth rates among provinces and among regions. Journal of Economic Literature, Classification Numbers: I31, O18, R12. 9 figures, 1 table, 77 references, 1 appendix.

Theory of Social Transformation, Political Transition and Economic Growth

In this paper, I develop a model of sociopolitical transition that links sociopolitical transformational process of countries to the dynamic process of output per capita and economic growth. Social polarization breeds discriminatory practices regarding government redistribution. This brings about inefficient allocation of resources away from production to political power struggle leading to poor economic outcomes. However, the model shows that social integrative processes may correct this inefficiency over time depending on the degree of social fractionalization, the level of social distance between the groups, the level of production technology, etc. Even though the model predicts long-run convergence of growth rates and output per capita across countries, it shows possible prolonged divergence of these economic variables.

International Status Seeking, Trade, and Growth Leadership

This paper formalizes international status seeking in a two-country model of endogenous growth: utility of agents in developing countries is affected by consumption gaps with advanced economies. By distorting intertemporal choices, envy tends to revert growth differentials in favor of the developing country when traded goods are substitutes. Notably, asymmetric preferences with endogenous status desire generate (i) convergence in growth rates in the presence of structural gaps, and (ii) convergence in income levels, if productivity differences are absorbed by technology diffusion. This process is driven by declining terms of trade and faster capital accumulation of the status seeker. A calibration exercise shows that the model predictions are consistent with the stylized facts that characterized the growth performance of East Asian economies.

The role of economic integration and disintegration in the post-Soviet space: A quantitative analysis

Problems of economic and institutional convergence and divergence in the post-Soviet space as a factor of regional economic integration are discussed. The concepts of β and σ convergence, as well as growth rate convergence, are used to investigate quantitative characteristics of these processes. The relationship of internal and external disintegration and its role for the economic space of the CIS and Russia are elicited.

Comparison of free-surface and rigid-lid finite element models of barotropic instabilities

The main goal of this work is to appraise the finite element method in the way it represents barotropic instabilities. To that end, three different formulations are employed. The free-surface formulation solves the primitive shallow-water equations and is of predominant use for ocean modeling. The vorticity–stream function and velocity–pressure formulations resort to the rigid-lid approximation and are presented because theoretical results are based on the same approximation. The growth rates for all three formulations are compared for hyperbolic tangent and piecewise linear shear flows. Structured and unstructured meshes are utilized. The investigation is also extended to time scales that allow for instability meanders to unfold, permitting the formation of eddies. We find that all three finite element formulations accurately represent barotropic instablities. In particular, convergence of growth rates toward theoretical ones is observed in all cases. It is also shown that the use of unstructured meshes allows for decreasing the computational cost while achieving greater accuracy. Overall, we find that the finite element method for free-surface models is effective at representing barotropic instabilities when it is combined with an appropriate advection scheme and, most importantly, adapted meshes.

Alternative regional specification and convergence of U.S. regional growth rates

We apply absolute beta convergence techniques to cross sectional per capita income data for alternative specifications of U.S. regions in order to detect whether U.S. regional growth rates are converging over relatively recent time periods. We also explore whether estimates of convergence differ between economic and political region specifications. We show that convergence of growth rates across regions of the U.S. has continued in modern times (1969–1997) for almost any regional specification and for all time frames considered. We do find, however, some difference in convergence rates between economic and political regions. Convergence coefficients, however, are remarkably similar across alternative economic region specifications.

Growth and Interdependence under Complete Specialization

We construct and numerically solve a dynamic Heckscher-Ohlin model in which the initial distribution of production factors in the world makes world-wide factor price equalization impossible, and leads countries to group in two diversification cones. We study the dynamics of income components and factor prices. Our results suggest that the Ramsey model under complete specialization (CS) overcomes several shortcomings of its autarchy and factor-price-equalization (FPE) counterparts. In comparison with the autarchy model, it can account for important cross-sectional differences in income per capita growth rates without generating too large rental-rate differentials across countries. Furthermore, the CS model generates cross-country convergence in growth rates and levels along the transition towards the steady-state. Finally, the CS model converges to FPE in the long run. Unlike the autarchy model, FPE does not necessarily yield convergence in levels; however, international trade is beneficial to both countries in terms of welfare.

Optimal International Taxation and Growth Rate Convergence: Tax Competition vs. Coordination

Optimal international taxation and its implications for convergence in long run income growth rates are analyzed in the context of an endogenously growing world economy with perfect capital mobility. Under tax competition (i) the residence principle will maximize national welfare; (ii) the optimal long run tax rate on capital incomes from various sources will be zero in all countries; and (iii) long term per capita income growth rates will be equalized across countries. Under tax coordination, (i) becomes irrelevant while (ii) and (iii) will continue to hold. In other words, optimal tax policies are growth-equalizing with and without international policy coordination.

Culture, Institutions, and Economic Growth: Theory, Recent Evidence, and the Role of Communitarian Polities

Theory: Recent work suggests achievement motivation and values embodied in civic culture promote economic growth while postmaterialist values inhibit growth. I provisionally propose that a distinct cluster of values and attitudes, particularly those that emphasize collective organization and societal consensus and concertation, combines with the institutions and practices of communitarian polities to foster economic growth. Hypotheses: After considering the theoretical and methodological sources of diverse findings on culture presented by Granato, Inglehart, and Leblang (GIL), and Jackman and Miller (JM), I hypothesize that communitarian polities, both confucian statist and social corporatist, should have higher economic growth rates than noncommunitarian polities. Method: To reflect on the often divergent conclusions on the growth effects of culture presented by GIL and JM, I consider the different theoretical and empirical models utilized by these authors and related methodological disparities. I then utilize Ordinary Least Squares and robust regression techniques to offer a preliminary analysis of the growth effects of communitarian polities in the context of the basic endogenous growth model. Results: Diverse and divergent findings offered by GIL and JM stem from different theoretical emphases, distinct empirical modeling strategies, and different sample composition and time frames. Statistical analyses suggest that a parsimonious model highlighting the significance of convergence in growth rates, human capital investment, and communitarian polities is empirically more powerful than alternatives. It explains a full 84% of the cross-national variation in 1960-89 growth rates in 25 countries.

Behavior of Industrial Sectors Earnings Growth Rates in the United States

The long-run equilibrium of the competitive model of the economy predicts that per capita income across industries and regions becomes equalized over time. Since earnings constitute a substantial part of income, that model predicts that earnings per person also equalizes over time. During the 1980s, state and regional income in the United States diverged. thereby contradicting the competitive model hypothesis as well as Simon Kuznets’s hypothesis of income equality varying directly with economic development. This paper examines earnings growth rates of 10 industrial sectors by using actual state data for 1969-88 and projected state data for 1988-2000. Even though the findings indicate overall convergence in growth rates based on state data, continued average inequality between regions persists.

Growth convergence reconsidered

Growth Rate Convergence Reconsidered. —While convergence properties lie at the heart of the endogenous-exogenous growth debate, the empirical literature on convergence to date remains ambiguous. Results appear to be particularly sensitive to the choice of income per capita or labor productivity as dependent variable. The paper shows that the dependence reflects a measurement error arising from the interdependence of human capital accumulation, labor force participation rates and development levels. Estimation of a corrected convergence equation yields results generally supporting convergence except in the manufacturing sector.