Economic Growth Convergence Research Articles

How the Demographic Dividend Affects Economic Convergence: Insights from Indonesia

This study investigates the effect of the demographic dividend on the convergence of regional economic growth in Indonesia post-fiscal decentralization from 2001-2023. Considering the two phases of the demographic dividend, namely the first dividend measured by economic support ratio and the second dividend measured by the accumulation of human capital, this paper uses the frontier and the conventional convergence approaches. The models are empirically estimated by static (Ordinary Least Square, fixed effect, random effect) and dynamic (Generalized Method of Moments) panel data regressions. The results confirm that per capita income growth in Indonesia’s provinces is converging, using both the frontier and conventional approaches. This implies that provinces with low per capita income are catching up to the national average and higher-income provinces. However, the convergence speed is relatively slow and takes a long time (878-1,525 years) to achieve the half-convergence stage. Demographic dividend interventions, such as improving economic support ratio and human capital, significantly boost convergence speed and reduce the time needed for half-convergence. Further analysis indicates that slow convergence may be due to the low-level equilibrium trap in fertility rates and economic support ratios, hindering regional economic growth convergence in Indonesia.

Analysis of Convergence and the Scenarios of Economic Growth in Indonesia Using System Dynamic Approach

This study aims to determine whether there is sigma convergence and beta convergence in Indonesia, to determine the effect of electricity infrastructure, human development, and ICT on convergence of economic growth, and to determine the scenario that can accelerate economic growth in Indonesia. The data used in this study is secondary data. The methods used are convergence analysis, panel data regression analysis, and dynamic system approach. The results showed that there was sigma convergence and no beta convergence in Indonesia in 2013-2022. Electricity infrastructure, human development, and ICT have not been able to encourage convergence of economic growth with electricity infrastructure having a significant negative effect, human development having a significant positive effect, and ICT having an insignificant negative effect. Scenarios that can be done to accelerate economic growth are structural scenarios and parameter scenarios.

The role of e-commerce demonstration zones in carbon emission reduction: Harmonizing economy and environment

The convergence of economic growth and environmental preservation has become a crucial objective for governments worldwide. As the digital economy helps transform industries, its carbon-reducing effect has been continuously validated. Technological innovation, policy support, and the promotion of trade openness are ways to encourage the greening of the digital economy. Currently, China is vigorously building a national e-commerce demonstration zone (EDZ). Hence, the main purpose of this study is to explore how e-commerce, as an important part of the digital economy, can help reduce carbon emissions (CE). Based on the panel data of 276 prefecture-level cities in China from 2007 to 2019, the empirical results obtained under the difference-in-difference model are that the establishment of EDZs can bring 0.0463 units of reduction in CE. The effect of suppressing CE is more significant for some regions located in the west, with larger city sizes and relatively scarce resource endowments. Distinguishing from the common paths of industrial structure, technological innovation, and optimal allocation of resources, this study also reveals the regulating role of economic openness in the mechanism analysis and finds that increasing foreign direct investment can effectively promote EDZs to reduce CE. The findings of this paper emphasize the practical significance of EDZs for energy saving and emission reduction, promoting green and high-quality development, and provide valuable references for managers and policy makers.

An investigation into the convergence of economic growth among Indian States and the path ahead

This study offers a comprehensive examination of economic growth and convergence in the Indian States and Union Territories (U.T.) over the period from 1991 to 2020. It investigates absolute, sigma, and conditional convergence within this diverse set of states and utilizes the augmented Solow and extended Solow models to explore conditional convergence dynamics. The empirical findings reveal several significant insights. First, there is no substantial negative correlation between the initial per capita GDP ratio and the average annual growth rate, indicating the absence of absolute convergence across the Indian States and U.T. economies during the study period. These results align with those obtained from sigma convergence analysis, reinforcing the absence of widespread convergence. However, conditional convergence is observed, as evidenced by the rate of conditional convergence (coefficient of initial GDP per capita) estimated at 0.038 among the Indian States and U.T. The presence of conditional convergence implies that while initial conditions matter, other factors, including physical and human capital, population growth, and additional variables, significantly contribute to the growth and convergence of Indian regions. The study concludes that policies aimed at promoting economic growth in the Indian States should prioritize the expansion of the labor force, investments in physical and human capital, and prudent government consumption. Furthermore, fostering an environment that encourages access to new technologies and ideas, maintaining sound macroeconomic management, and increasing investments in human capital formation are essential for sustained growth. Effective resource allocation through prudent budgetary policies and heightened investments in the health sector are recommended. Incentives to reduce fertility rates and adept monetary policy management are also identified as crucial elements for ensuring stability and sustainable growth. In summary, this research underscores the importance of adopting a holistic approach to foster economic growth and convergence in the Indian States. The suggested policy measures create a conducive environment for sustained development and prosperity in this diverse and dynamic region.

ANALISIS POTENSI KONVERGENSI EKONOMI NEGARA ANGGOTA ASEAN-10 TAHUN 2015-2021 DAN FAKTOR-FAKTOR YANG MEMPENGARUHINYA

In 2015 is the year of the acceleration of the establishment of the ASEAN Economic Community (AEC), therefore it is necessary to analyze the economy of each member country based on factors that affect the convergence process. This study aims to analyze the level of convergence of economic growth among ASEAN-10 member countries in 2015-2021. The data used is secondary data obtained from the world bank website. The analytical methods used in this study are sigma convergence and beta convergence. The calculation of sigma convergence uses mathematical analysis of the coefficient of variation of GDP per capita of ASEAN-10 member countries. While the calculation of beta convergence uses panel data regression analysis with a fixed effect model approach. The results showed that there was no sigma convergence among ASEAN-10 member countries, indicating that there was no decrease in inequality among member countries. The results of the analysis on beta convergence show that there is absolute and conditional beta convergence at a rate of 7,5% and 3,1%. It was found that the Foreign Direct Investment and Total Labor Force variables did not have a significant effect, while the Trade Openness variable had a significant effect.

Convergence and Paths of Economic Growth

Convergence and Paths of Economic Growth

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.

The Convergence of Economic Growth: Case Study of East Java

Economic growth is a parameter in achieving regional economic development, which describes an increase in the actual production capacity and the dynamics of the regional economy. This study aims to determine whether there is a yearly decrease in economic growth inequality (sigma convergence) or an acceleration of low economic growth to high economic growth (beta convergence) in East Java in 2016 – 2021. This study used secondary data. The analytical method used in this study is convergence and panel data regression analysis. The results showed that the dispersion of economic growth experienced a downward trend, indicating the occurrence of sigma convergence in East Java. Underdeveloped regions do not grow faster than developed regions, showing no absolute beta convergence in East Java. The HDI and Population Variables have not been able to accelerate convergence in East Java, indicating no conditional beta convergence in East Java.

Social capability and long-term sustained growth

Long-term growth is not a simple transition along the path of equilibrium growth, but a process of the interplay of technological, economic, institutional, and social factors. Social capability is an important prerequisite for late-developing countries to catch up with leading countries, and the combination of social capability and the technology gap co-determine the potential of a country to improve productivity through catching up. This paper clarifies the theoretical mechanism of social capability to promote economic growth, and reveals that accountability quality may become capability gap which impedes the convergence of economic growth of the low-income countries by analyzing the panel data from 166 countries over the period 1996–2019. This paper believes that with the rising income level, it is the general path of sustained economic growth to promote the modernization of economic structure while ensuring the supply of goods and effective social incentives.

Convergence of economic growth and health expenditures in OECD countries: Evidence from non-linear unit root tests.

The relationship between human capital, health spending, and economic growth is frequently neglected in the literature. However, one of the main determinants of human capital is health expenditures, where human capital is one of the driving forces of growth. Consequently, health expenditures affect growth through this link. In the study, these findings have been attempted to be empirically tested. Along this axis, health expenditure per qualified worker was chosen as an indicator of health expenditure, and output per qualified worker was chosen as an indicator of economic growth. The variables were treated with the convergence hypothesis. Due to the non-linear nature of the variables, the convergence hypothesis was carried out with non-linear unit root tests. The analysis of 22 OECD countries from 1976 to 2020 showed that health expenditure converged for all countries, and there was a significant degree of growth convergence (except for two countries). These findings show that health expenditure convergence has significantly contributed to growth convergence. Policymakers should consider the inclusiveness and effectiveness of health policies while making their economic policies, as health expenditure convergence can significantly impact growth convergence. Further research is needed to understand the mechanisms behind this relationship and identify specific health policies most effective in promoting economic growth.

Human capital quality and the regional economic growth: Evidence from China

China's economic development has advanced from a high-speed to a high-quality growth stage in recent years. The optimization and upgrading of the economic structure require high-quality human capital to support an innovation-driven economy. In this paper, a general equilibrium model of human capital (Xiang & Yeaple, 2018) is applied to estimate the cognitive and non-cognitive productivities based on Chinese provincial-level macro-data and individual labor's micro-data from 2008 to 2017. The weighted power mean of cognitive and non-cognitive productivities helps calculate the provincial-level human capital quality index (HCQI), which provides a realistic estimate of human capital quality. We find that the improvement of the HCQI leads to convergence in economic growth in China's provinces. HCQI can help explain the differences in economic growth levels in different regions of China. Our study provides a constructive step in understanding cognitive and non-cognitive abilities and HCQI in China, which could help guide education investment policy in China and its provinces.

Knowledge and Economic Growth: A Dynamic Panel Data Analysis for OECD Countries

This paper aims to investigate the role of knowledge in the economic growth convergence of the OECD member countries during the 1995-2011 period, by utilizing the production function approach. In our augmented production function framework, in addition to human capital, we consider other important channels of knowledge (R&D, trade and ICTs) to understand how knowledge contributes to the growth performance and growth convergence of the OECD countries. Furthermore, in contrast to most of the existing studies which used traditional panel data analysis, this study utilizes dynamic panel data techniques. This approach enables us to utilize the long-run information in the data and hence gives us the possibility to analyze the impact of knowledge indicators on economic growth by focusing on equilibrium relations over a longer time horizon. The empirical results suggest a positive impact of knowledge indicators on the economic growth performances of OECD countries and that there is convergence to a common long-run equilibrium in OECD.

Convergence Analysis of Economic Growth on Sumatra Island

This study aims to determine the level of convergence of economic growth in Sumatra Island from 2015 to 2021. The data used are secondary data sourced from the Central Agency. Statistics. The analysis used in this research is Regression Test Analysis, Partial Test (t-test), and Simultaneous Test (F test). The third model is used to see the level of convergent beta on the island of Sumatra. The results of data analysis show that both per capita PDRB and PDRB growth show the level of convergence that occurs is greater than zero (> 0). This means that the growth of PDRB per capita and PDRB between provinces on the island of Sumatra tends to diverge. Economic growth in poor areas is still relatively slow compared to rich areas. The results of research conducted in 10 provinces on the island of Sumatra for the period 2015-2021 have an absolute convergence speed (economic growth) of 0.587670 which means that there has been a convergence speed of economic growth at absolute convergence on the island of Sumatra.
 

Regional Disparity and Social-Economic Convergence in New Autonomous Regions in Banten Province

As a new province after separating from West Java province, Banten province has experienced various economic growth among its regions, which can reveal disparity in development. Some regions have abundant resources, productive human resources, and access to good economic activities, while others do not. This condition causes inequality between regions. Regional convergence analysis measures not only economic variables but also social measures, such as the Human Development Index (HDI), poverty, and unemployment. This study aims to analyze sigma and absolute beta convergence, in addition to measuring the speed of the new autonomous region (Daerah Otonom Baru/DOB) economic growth convergence in Banten. The study method for regional disparity uses coefficient of variation and klassen typology. The klassen typology approach was used to identify sectors. The results of this study show that disparities occur in regions/cities within the province. The GDRP per capita, HDI, poverty, and unemployment in each region from years 2015-2019 were analyzed using the analytical methods σ-convergence and β-convergence. Regional convergence also occurs, but it is not clear enough to show the possible rate distribution convergence in the future. Socioeconomic factors, including unemployment and poverty, have become factors that impact the rate convergence in the province. Meanwhile, the human resource quality factor does not significantly impact. The new autonomous region (DOB) strategy uses a developing regional strategy, while the parent region has a lagging status. The implication of this research is that each region needs to develop sectors according to its characteristics.

Convergence or Divergence in Economic Growth of Commonwealth of Independent States (CIS)

Abstract In this study, the issue of economic growth and Convergence in the 12 countries of the CIS region has been investigated thoroughly for 27 years, from 1991–2017. The paper examines the absolute, sigma and conditional Convergence of the CIS region. Conditional Convergence is examined through the augmented Solow and extended Solow models. During the study period, the empirical results confirm no significant negative correlation between the initial ratio of the countries per capita GDP and the average yearly growth rate. Thus, indicating the absence of absolute β convergence across the CIS economies during 1991–2017. The results of the sigma convergence are consistent with the results derived from the absolute convergence model. Referring to the augmented Solow model estimations, we found the rate of conditional β-convergence (coefficient of initial GDP per capita) of value 0.028 among members of the CIS region after controlling GDP per capita, physical and human capital and population growth have important contributions to make in the growth and Convergence of countries. In Solow extended growth regression, the initial GDP per capita coefficient is 0.33. Therefore, besides the initial level of per capita income, physical and human capital and population growth, other factors have important contributions to make to the growth and Convergence of countries of CIS.

Regional Income Convergence Analysis in East Java: Does Investment Matter?

The convergence hypothesis in the Neo-Classical growth approach says that a region or country with a low per capita income will experience faster catch-up growth than a richer country. However, the theory of endogenous growth, as well as New Economic Geography (NEG), states that divergence occurs. The contradictions among those theories become the basis of this research. This study uses a case study of East Java because it has a relatively large share of PDRB to GDP, but still has a relatively high inequality. This study aims to examine the effect of government investment on the convergence of economic growth in East Java. This study uses per capita Gross Regional Domestic Product (PDRB) and Gross Fixed Capital Formation (PMTB) accessed from the annual report of the Central Bureau of Statistics in each city in East Java during the period 2010 to 2021. The results of the study show that -convergence and -convergence both have a divergence process. This study provides policy recommendations in the form of concentrating investment in new central areas as the formation of centers of economic growth, such as Special Economic Zones (SEZ) in the southern region of East Java.

The Impact of Foreign Direct Investment on Regional Economic Growth and Income Convergence a Panel Data Study in China

Previous studies regarding the impact of FDI on regional economic growth and income convergence in China have mixed results and are far from being conclusive due to different datasets and methodologies used. This study thus used a panel data from China Statistical Yearbook covering all 31 Chinese regions to better understand the impact of FDI on regional economic growth and income convergence in China. For the period between 1999 and 2017, it found that neither FDI inflow nor labor has a statistically significant impact on the provincial economic growth. However, domestic investment in fixed assets does have a statistically significant impact on the provincial economic growth. Moreover, there is no absolute ? income convergence among regions. Nonetheless, there is a conditional ? income convergence (a moderate convergence speed of 7.49%) after controlling for all other growth factors: domestic investment in fixed assets, population growth rate, FDI inflow, export, and higher education enrollment.

Analysis of the Influence of the Covid-19 Pandemic on Economic Growth Convergence at the District/City Level in East Java: What Is the Right Public Policy?

Indonesia has experienced relatively significant and stable economic growth in the last decade. However, Indonesia, a developing country, is still vulnerable to income disparities between regions or regions. It is due to the unequal distribution of natural resources, population, and development concentration. This study aims to examine the effect of the COVID-19 pandemic on the convergence of economic growth in East Java Province. In this study, per capita Gross Regional Domestic Product (GRDP) data or secondary data with panel type is used which is accessed from the annual report of the Central Statistics Agency in each district or city in East Java for the period 2010 to 2020. By using the -convergence analysis technique and -convergence and considering the spatial dependence between regions, the researchers found no substantial evidence of the occurrence of regional income convergence in East Java. There has been a divergence in regional income before and after the pandemic. But with a more significant divergence coefficient before the pandemic, it means that the existence of a pandemic has reduced the level of divergence even though the catch-up effect is negligible on economic growth. In general, this means a decrease in income inequality due to the pandemic, as rich regions are affected more than poor regions. So that public policy recommendations are needed, especially after the pandemic, through recovery that focuses on improving the economic sector in the affected affluent areas such as Surabaya and others.

Growth Convergence in OECD Countries : Focusing on the ICT and Using Spatial Regression Approach

In this paper, we examine how Information and Communication Technology (ICT) affect the convergence of economic growth rates for OECD countries from 2001 to 2017. To do so, we apply spatial regression models with various spatial weights: geographic distance weight and economic distance weight. Our results confirm that economic growth convergence can occur in spatial dimension. We also find that population growth and human capital have stronger spillover for economic distance weight than geographic distance weight. On the other hand, physical capital and ICT variables have more significant spillover effects for geographic distance weight than economic distance weight. According to our results, Internet and mobile phone can be geographically spilled over different countries rather than economically close countries. In the meantime, human-related factors still deserve more attention for better understanding of spillover among economically similar countries.

The Impact of Foreign Direct Investment on Income Convergence in China - A Spatial Panel Data Analysis

After taking into account the spatial dependence effects in the panel data consisting of all 31 provinces, direct-controlled municipalities, and autonomous regions in China between the years 1998 and 2017, it found significant spatial autocorrelation effects in both traditional absolute and conditional β income convergence models. At the national level, using the spatial econometric models (Spatial Error Model for absolute convergence and Spatial Durbin Model for conditional convergence), the analysis shows that in the past 19 years from 1999 to 2017, there is no absolute β income convergence. However, there is conditional β income convergence after controlling for all growth factors, while the positive effect of fixed asset investment on regional economic growth is significant, and the effect of population growth is significantly negative. The other growth factors such as FDI inflow, export, and higher education enrollment were surprisingly found no statistically significant effects on regional economic growth. From regional level (Spatial Durbin Model and Spatial Lag Model), there is no conditional β income convergence within each four economic regions. Nonetheless, the northeast region showed an income divergence trend, where only the fixed asset investment is positively significant. This study results imply that China should continue to improve fixed asset investment and control population growth to stimulate regional economic growth and income convergence.