Unconditional Convergence in Economic Growth

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

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

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

<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

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

<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

<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

<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

<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

<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

<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

<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

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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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

<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