Galton's Fallacy and Tests of the Convergence Hypothesis
AbstractRecent tests for the convergence hypothesis derive from regressing average growth rates on initial levels: a negative initial level coefficient is interpreted as convergence. These tests turn out to be plagued by Galton's classical fallacy of regression towards the mean. Using a dynamic version of Galton's fallacy, the author establishes that coefficients of arbitrary signs in such regressions are consistent with an unchanging cross-section distribution of incomes. Alternative, more direct empirics used here show a tendency for divergence, rather than convergence, of cross-country incomes. Copyright 1993 by The editors of the Scandinavian Journal of Economics.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 95 (1993)
Issue (Month): 4 (December)
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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