Unconditional Convergence in Economic Growth
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Match the following growth models with their main predictions or findings:

Solow Growth Model = Poor countries should grow faster than rich countries Barro (1991) = No significant evidence of convergence Lucas et al. (1988) = Impact of human capital on growth Romer (1990) = Role of technology in economic growth

Match the following authors with their contributions to the growth literature:

Pritchett (1997) = Examined economic growth discrepancies Rodrik (2014) = Discussed factors influencing growth rates Johnson and Papageorgiou (2020) = Reviewed recent growth literature Quah (1993) = Explored convergence clubs in growth

Match the following terms with their definitions:

Unconditional Convergence = Economic growth characterized by poorer countries catching up σ-convergence = Dispersion in the level of income per capita Conditional Convergence = Growth dependent on controlling for certain factors Convergence Clubs = Groups of economies that grow at similar rates

Match the following years with their significance regarding economic growth:

<p>1990s = Turning point for unconditional convergence 1960s = Start of stellar performance in some developing countries 1988 = Lucas's influential paper on growth 1991 = Barro's study on growth and income levels</p> Signup and view all the answers

Match the following years with their corresponding convergence ranges:

<p>1990 = [-.0045, -.0035] 2000 = [.0015, .0025] 2010 = [.0025, .0035] 1960 = Not Applicable</p> Signup and view all the answers

Match the following statements with their implications for growth theory:

<p>Access to the same technology = Low-income countries should accumulate capital efficiently Null finding of convergence = Stimulated research on factors affecting growth High marginal product of capital = Expect faster growth in poorer countries Cross-country dispersion = Challenges traditional growth models</p> Signup and view all the answers

Match the following statistical terms with their definitions:

<p>Unconditional Convergence = The hypothesis that poorer economies will tend to grow at faster rates than richer ones. Convergence Parameter (β) = The rate at which an economy converges to a stable growth path. Standard Error = A measure of the statistical accuracy of an estimate. Population Exclusion = Exclusion of countries based on size for analysis.</p> Signup and view all the answers

Match the following statistical ranges with their corresponding labels:

<p>[.0015, .0025] = Low Convergence Rate [-.0005, .0005] = No Convergence [-.0025, -.0015] = Negative Convergence Rate [-.0045, -.0035] = High Negative Convergence Rate</p> Signup and view all the answers

Match the following regions with their growth performance post-1960s:

<p>East Asia = Significant economic growth and development Sub-Saharan Africa = Struggled with economic growth Latin America = Mixed growth results Central Asia = Observing gradual improvements</p> Signup and view all the answers

Match the following growth-related concepts with their characteristics:

<p>Marginal Product of Capital = Higher in low-income countries Economic Divergence = Richer countries retaining their advantage Investment in Human Capital = Key factor for economic growth Foreign Aid = Controversial in its impact on growth</p> Signup and view all the answers

Match the following sample exclusions with their implications:

<p>Oil Exporters = Countries reliant on oil revenue may skew growth data. Populations under 1 million = Small countries may not provide significant statistical relevance. Countries with diverse economies = Better representation of economic trends. Countries with war conflicts = Data may be unreliable due to instability.</p> Signup and view all the answers

Match the following findings with their respective studies or theories:

<p>Barro's null result = No convergence in growth rates Role of factors like trade = Conditional convergence Durlauf and Johnson's work = Examined non-linearities in growth Birdsall et al. (1993) = Focused on developing nations' growth patterns</p> Signup and view all the answers

Match the following plots with their associated years:

<p>2010 = [.0025, .0035] 2000 = [-.0015, -.0005] 1990 = [-.0045, -.0035] 1960 = No data available</p> Signup and view all the answers

Match the following convergence concepts with their effects:

<p>Absolute Convergence = The concept that all economies will converge to the same per capita income level. Conditional Convergence = The idea that economies will converge to their own steady states. Divergence = When economies become increasingly different over time. Regression Analysis = A statistical process for estimating relationships among variables.</p> Signup and view all the answers

Match the following economic concepts with their real-world concerns:

<p>Economic Growth = Improvement in the wealth of nations. Inflation = Rising prices affecting purchasing power. Unemployment = Job seekers unable to find work. GDP = Total economic output of a country.</p> Signup and view all the answers

Match the following data points with their expected trends:

<p>High β value = Faster convergence rate Low β value = Slower convergence rate Negative β value = Economic divergence Zero β value = No change in convergence</p> Signup and view all the answers

Match the following datasets with their descriptions:

<p>Penn World Tables (PWT) = Data source that calculates growth rates until 2019 World Development Indicators (WDI) = World Bank's extensive dataset for economic indicators Maddison Project = Focuses on historical GDP estimates from 2020 Barro and Sala-i-Martin (1992) = Authors of the regression estimation method used</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Conditional convergence = Achieving convergence when controlling for specific factors Unconditional convergence = Convergence tested without controlling variable influences β parameter = Indicates the rate and significance of convergence Non-linear least squares = A statistical method used to estimate parameters robustly</p> Signup and view all the answers

Match the following years with their significance in the study:

<p>1960 = First year considered for the starting point of growth rates 1995 = Transition period for β parameter significances 2010 = Latest starting point used where convergence is meaningful 2018 = Fixed terminal date for Maddison growth rates</p> Signup and view all the answers

Match the following descriptions with their corresponding observations regarding growth rates:

<p>Negative β in early datasets = PWT and Maddison data showed negative growth rates for early starting dates Statistically insignificant β = WDI data indicated convergence that was not statistically significant Positive and significant β after 1995 = All datasets reported positive and statistically significant βs post-1995 Constant sample analysis = Appendix Figure A.1 used a fixed sample of countries since 1980</p> Signup and view all the answers

Match the following authors with their contributions:

<p>Feenstra et al. (2015) = Authors behind the Penn World Tables Bolt and van Zanden (2020) = Creators of the Maddison Project World Bank, 2020 = Institution responsible for the World Development Indicators Barro and Sala-i-Martin = Introduced the β parameter in economic growth studies</p> Signup and view all the answers

Match the terms with their implications on convergence:

<p>Positive β = Denotes convergence between GDP levels Negative β = Indicates divergence in economic growth Statistically insignificant = Suggests no clear trend in convergence Heteroskedasticity-robust = Refers to standard errors accommodating variable variance</p> Signup and view all the answers

Match the following results with their years in the study:

<p>2019 = Final year for available data in this study 2010 = Earliest point shown for growth rate analysis with fixed samples 1960 = First year starting point for testing convergence 1995 = Year after which βs become significantly positive in all datasets</p> Signup and view all the answers

Match the following types of convergence with their characteristics:

<p>Convergence beyond short horizons = Implication for long-term economic analysis Fixed terminal date = Stabilization of end-year for comparing growth rates Cross-country data analysis = Comparison of multiple nations' economic growth Starting points variation = Systematic adjustment to analyze different economic conditions</p> Signup and view all the answers

Match the following parameters with their respective meanings or implications:

<p>β parameter = Speed of convergence toward steady state income τ = Half-life for closing income gap σ-convergence = Reduction of variance in per capita GDP across countries Unconditional β-convergence = Long-term convergence without specific conditions</p> Signup and view all the answers

Match the time periods with the observed convergence trends:

<p>1960-2000 = Mixed convergence affecting both rich and poor countries 2000-2019 = Improvement in growth for poor countries Post-1990s = Potential decline in performance of rich countries 2008 = Start of significant σ-convergence concerns</p> Signup and view all the answers

Match the following researchers or studies with their findings:

<p>Sala-i-Martin (1996) = Estimation of convergence coefficient De Long (2018) = Argument on OECD countries' performance Young et al. (2008) = Proof of β-convergence and σ-convergence relationship PWT sample analysis = Estimation of β during 2000-2019</p> Signup and view all the answers

Match the following concepts with their definitions:

<p>Conditional convergence = Convergence based on specific parameters Mean zero shocks = Assumption for growth variability Standard error = Measure of variability in convergence estimate Overall variance = Metric indicating income distribution spread across nations</p> Signup and view all the answers

Match the following statements with whether they reflect convergence or divergence trends:

<p>Declining growth in rich countries = Convergence No meaningful σ-convergence found = Divergence Half-life τ estimated at 170 years = Slow convergence Poor countries accelerating growth = Convergence</p> Signup and view all the answers

Match the terms with their correlations to convergence dynamics:

<p>Diminishing returns to growth = Potential slowing of rich countries Economic shocks = Assumed independent across space and time Variance in income distribution = Influences σ-convergence outcome Long-term growth strategies = Improvements in poor country performance</p> Signup and view all the answers

Match the terms to their corresponding effects on β-convergence:

<p>Lower variance initial distribution = Can impede σ-convergence Higher β estimates = Faster income gap closure Global Financial Crisis = Shift in σ-convergence dynamics Mean zero growth shocks = Assumption for β-convergence framework</p> Signup and view all the answers

Match the economic terms with their context in the discussion of convergence:

<p>Poverty gap = Income levels between steady state and current Growth acceleration = Improvement in poorer economies OECD performance decline = Diminished growth among rich nations Income distribution reduction = Impact on σ-convergence post-2008</p> Signup and view all the answers

Match the following income categories with their respective growth outcomes in the period of convergence:

<p>Low-income countries = Improved average performance with fewer extreme adverse outcomes Middle-income countries = Significant upward shift in growth rates High-income countries = Decline in mean growth by about half a percentage point Sub-Saharan Africa = Consistent under-performance compared to other regions</p> Signup and view all the answers

Match the following time periods with their features regarding country growth rates:

<p>1960-1990 = Broadly stable growth for rich countries 1980s-1990s = Era of divergence with high negative growth for low-income countries Post-2000 = Notable upward drift for poor countries Early 1990s = Stationary distribution of country growth rates</p> Signup and view all the answers

Match the following statistical measures with the respective income categories they signify:

<p>5th percentile (Low-income) = Moves up by close to 0.5 percentage points 95th percentile (Middle-income) = Moves up by about 2 percentage points Mean (Low-income) = Increases by a little under 1 percentage point Mean (Middle-income) = Increases by about 1.5 percentage points</p> Signup and view all the answers

Match the following researchers with their respective contributions to the discussion of convergence:

<p>Broadberry and Wallis = Documented positive growth rates for poor countries Pritchett = Noted the transformation from 'valleys' to 'hills' for poor countries Birdsall et al. = Explored dynamic performance of Asia Collier and Gunning = Analyzed under-performance of sub-Saharan Africa</p> Signup and view all the answers

Match the following observations with their respective implications for growth trends:

<p>Fewer 'valleys' in the convergence era = Suggests a significant reduction in extreme adverse outcomes for poor countries Downward drift in growth of rich countries = Contributed to the overall convergence observed Improvement in the entire distribution of poor countries = Facilitated unconditional convergence 16 percent of low-income countries experiencing negative growth in the 2010s = Reflects a marked improvement from previous decades</p> Signup and view all the answers

Match the following statements with the correct assertions about convergence and divergence:

<p>Unconditional convergence = Primarily driven by the performance improvement of poor countries Rich country performance decline = Not the primary cause of unconditional convergence 80s to 90s economic climate = Characterized by many low-income countries with negative growth 2010s growth distribution = Showed almost all countries clocking positive growth rates</p> Signup and view all the answers

Match the following descriptions with the relevant economic concepts:

<p>Dynamic performance in Asia = Highlighted as a region with notable growth improvement Under-performance of sub-Saharan Africa = Consistent finding in the literature Positive growth rates = Emerging as a trend for low-income countries in the convergence era Growth rate shifts = Notable increases in low- and middle-income countries post-1990s</p> Signup and view all the answers

Match the following economic periods with their growth trajectories:

<p>Post-1960s = Characterized by a stationary growth distribution 1990s = Marked by low-income countries facing severe negative growth Early 2000s = Significant upward movement in growth for poorer nations Current decade = Reflects a diminishing percentage of low-income countries with negative growth</p> Signup and view all the answers

Study Notes

Unconditional Convergence in Economic Growth

  • The study examines the β parameter, reflecting unconditional convergence in GDP growth, using data from 1960 to 2010, excluding oil exporters and nations with populations below one million.
  • Notable decline in the GDP ratio of the U.S. to India, which fell to 9:1 by 2017, indicating significant convergence in economic performance.
  • Previous findings of unconditional divergence have reversed, showing that poorer countries are now growing faster relative to richer countries since the mid-1990s.

Key Theoretical Foundations

  • The Solow (1956) growth model suggests that poorer countries should grow faster than wealthier ones, given equal technology access and lower capital stock, leading to a higher marginal product of capital.
  • Historical analysis indicated no statistically significant evidence of convergence for poorer countries over long horizons, contrary to the Solow model predictions.

Empirical Analysis and Findings

  • Using regression analysis, findings refute the notion of unconditional convergence prior to the mid-1990s, where countries did not consistently grow at faster rates proportionate to their poorer status.
  • The literature evolved through significant studies (e.g., Barro 1991, Pritchett 1997) exploring various factors influencing growth, notably ones that could lead to conditional convergence.
  • Current evidence shows a trend of unconditional convergence with positive growth characterized across low-income countries since the mid-1990s.

Convergence Metrics and Data Analysis

  • The β parameter estimates vary across sources (Penn World Tables, World Development Indicators, Maddison Project) but exhibit a consistent shift towards significance post-1995.
  • Conditions for convergence measured using an estimated half-life τ, initially calculated to be 35 years, is now considerably longer at approximately 170 years based on recent data from 2000-2019.

Dynamics of Growth Disparities

  • Convergence observed post-2000 arises from both improved economic performance in poorer countries and declining growth rates in wealthier nations.
  • Noteworthy increases in growth for low- and middle-income countries compared to significantly reduced growth in wealthier nations around 1990s onward.

Regional Aspects and Historical Context

  • The study notes fewer adverse economic outcomes for poor countries in the era of convergence, with a decrease in the percentage of low-income nations experiencing negative growth from 24%-42% in the 1980s and 1990s to just 16% in the 2010s.
  • The analysis highlights stark contrasts in economic performance between regions, notably the dynamic growth in Asia compared to the slower progress in sub-Saharan Africa, contributing to the overall results in conditional convergence.

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Description

This quiz explores the concept of unconditional convergence in GDP growth, focusing on findings from 1960 to 2010. It discusses the decline in the U.S. to India GDP ratio and contrasts past divergence with recent trends where poorer countries are growing faster. The Solow growth model's theoretical foundations and empirical analysis will also be examined.

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