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Income Convergence within and between Countries

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  • Fischer, Ronald D
  • Serra, Pablo J

Abstract

The authors study how trade changes the rate of income convergence within and between countries in a model of endogenous growth. An externality in the production of human capital implies that inequality slows down growth under autarky. Eventually incomes converge, raising the growth rate. Trade accelerates (slows down) growth and the rate of income convergence in the poor (rich) country. In the long run, trade ensures that countries grow at the same rate and that the ratio of their incomes tends to one. Trade pattern reversals are possible since the initially wealthy country may be overtaken by the poor country. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Fischer, Ronald D & Serra, Pablo J, 1996. "Income Convergence within and between Countries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 531-551, August.
    • Handle: RePEc:ier:iecrev:v:37:y:1996:i:3:p:531-51
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    Cited by:

    1. Yoshiaki Sugimoto, 2003. "Inequality, Growth, and Overtaking," Data 0304001, University Library of Munich, Germany.
    2. Epstein, Philip & Howlett, Peter & Schulze, Max-Stephan, 2004. "Trade, convergence and globalisation: the dynamics of change in the international income distribution, 1950-1998," Economic History Working Papers 13295, London School of Economics and Political Science, Department of Economic History.
    3. Cabral, René & López Cabrera, Jesús Antonio & Padilla, Ramón, 2020. "Absolute convergence in manufacturing labour productivity in Mexico, 1993–2018: A spatial econometrics analysis at the state and municipal level," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 46492, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. Jean-Marie Viaene & Itzhak Zilcha, 2001. "Human Capital Formation, Income Inequality and Growth," CESifo Working Paper Series 512, CESifo.
    5. Epstein, Philip & Howlett, Peter & Schulze, Max-Stephan, 2007. "Trade, convergence, and globalisation: The dynamics of the international income distribution, 1950-1998," Explorations in Economic History, Elsevier, vol. 44(1), pages 100-113, January.
    6. Saccone Donatella, 2008. "Economic openness, skill demand and skill supply in three archetypes of developing countries: a theoretical and empirical investigation," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200813, University of Turin.
    7. Epstein, Gil S. & Spiegel, Uriel, 2001. "Natural inequality, production and economic growth," Labour Economics, Elsevier, vol. 8(4), pages 463-473, September.
    8. Haris Munandar, 2008. "Heterogeneous Agents, Human Capital Formation and International Income Inequality," Tinbergen Institute Discussion Papers 08-015/2, Tinbergen Institute.
    9. Viaene, Jean-Marie & Zilcha, Itzhak, 2002. "Capital markets integration, growth and income distribution," European Economic Review, Elsevier, vol. 46(2), pages 301-327, February.
    10. Das, Satya P., 2006. "Trade, skill acquisition and distribution," Journal of Development Economics, Elsevier, vol. 81(1), pages 118-141, October.
    11. Ben Fine, 1998. "Endogenous Growth Theory: A Critical Assessment," Working Papers 80, Department of Economics, SOAS University of London, UK.
    12. Mustafa Zuhal, 2023. "Technological Convergence in Emerging Economies: An Investigation with Unit Root Tests," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 10(2), pages 567-586, July.
    13. Sugimoto, Yoshiaki, 2006. "Inequality, Growth, And Overtaking," Macroeconomic Dynamics, Cambridge University Press, vol. 10(5), pages 625-651, November.
    14. Yoshiaki Sugimoto, 2005. "Inequality, Growth, and Overtaking," Development and Comp Systems 0508012, University Library of Munich, Germany.

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