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Convergence behaviour in exogenous growth models

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  • Jochonia S Mathunjwa
  • Jonathan Temple

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Abstract

This paper analyzes several aspects of convergence behaviour in the Solow growth model. In empirical work, a popular approach is to log-linearize around the steady-state. We investigate the conditions under which this approximation performs well, and discuss convergence behaviour when an economy is some distance from the steady-state. A formal analysis shows that convergence speeds will be heterogeneous across countries and over time. In particular, the Solow model implies that convergence to a growth path from above is slower than convergence from below. We find some support for this prediction in the data.

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File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp06590.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 06/590.

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Length: 44 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:bri:uobdis:06/590

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Keywords: convergence; economic growth; Solow model;

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References

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  1. Sala-i-martin, X., 1995. "The Classical Approach to Convergence Analysis," Papers 734, Yale - Economic Growth Center.
  2. Carlin, Wendy & Soskice, David, 2005. "Macroeconomics: Imperfections, Institutions, and Policies," OUP Catalogue, Oxford University Press, number 9780198776222, September.
  3. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  4. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  5. Williams, R. L. & Crouch, R. L., 1972. "The adjustment speed of neoclassical growth models," Journal of Economic Theory, Elsevier, vol. 4(3), pages 552-556, June.
  6. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-85, December.
  7. Okada Toshihiro, 2006. "What Does the Solow Model Tell Us about Economic Growth?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-30, April.
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Cited by:
  1. Dimitris, Chrsitopoulos & Miguel, Leon-Ledesma, 2009. "International Output Convergence, Breaks, and Asymmetric Adjustment," MPRA Paper 14566, University Library of Munich, Germany.
  2. Jesús Crespo Cuaresma & Martin Feldkircher, 2013. "Spatial Filtering, Model Uncertainty And The Speed Of Income Convergence In Europe," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(4), pages 720-741, 06.
  3. G Caggiano & L Leonida, . "International Output Convergence: Evidence from an AutoCorrelation Function Approach," Working Papers 2006_20, Business School - Economics, University of Glasgow.
  4. Dedák, István & Dombi, Ákos, 2009. "Konvergencia és növekedési ütem
    [Convergence and growth rate]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 19-45.

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