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Convergence, Endogenous Growth, and Productivity Disturbances

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  • Leung, Charles K
  • Quah, Danny

Abstract

Kelly (1992) has recently shown that evidence on convergence cannot be taken as evidence against endogenous growth in general. This study uses a well-known class of stochastic growth models to show other difficulties with traditional empirical studies of convergence. Key parameters typically cannot be estimated consistently in cross-section regressions. When the parameters are assumed known, implications for convergence are unavailable except under restrictive and economically unmotivated assumptions. Those same assumptions that relate key parameters to cross-country convergence render cross-section regressions impossible to estimate consistently.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1383.

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Date of creation: Apr 1996
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Handle: RePEc:cpr:ceprdp:1383

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Keywords: Cross-country Dependence; Cross-country Regression; Increasing Returns; Stochastic Growth; Time-series Regression;

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References

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Barro, R.J. & Mankiw, N.G. & Sala-i-Martin, X., 1992. "Capital Mobility in Neoclassical Models of Growth," Papers 655, Yale - Economic Growth Center.
  3. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
  4. Lucas, Robert E, Jr, 1993. "Making a Miracle," Econometrica, Econometric Society, vol. 61(2), pages 251-72, March.
  5. Andrew B. Bernard & Steven N. Durlauf, 1994. "Interpreting Tests of the Convergence Hypothesis," NBER Technical Working Papers 0159, National Bureau of Economic Research, Inc.
  6. den Haan, Wouter J., 1995. "Convergence in stochastic growth models The importance of understanding why income levels differ," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 65-82, February.
  7. Quah, Danny, 1993. "Empirical cross-section dynamics in economic growth," European Economic Review, Elsevier, vol. 37(2-3), pages 426-434, April.
  8. Galor, Oded, 1996. "Convergence? Inferences from Theoretical Models," CEPR Discussion Papers 1350, C.E.P.R. Discussion Papers.
  9. Ben-David, Dan, 1994. "Convergence Clubs and Diverging Economies," CEPR Discussion Papers 922, C.E.P.R. Discussion Papers.
  10. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  11. Canova, Fabio & Marcet, Albert, 1995. "The Poor Stay Poor: Non-Convergence Across Countries and Regions," CEPR Discussion Papers 1265, C.E.P.R. Discussion Papers.
  12. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
  13. Kelly, Morgan, 1992. "On endogenous growth with productivity shocks," Journal of Monetary Economics, Elsevier, vol. 30(1), pages 47-56, October.
  14. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
  15. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
  16. Carlino, Gerald A. & Mills, Leonard O., 1993. "Are U.S. regional incomes converging? : A time series analysis," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 335-346, November.
  17. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  18. Quah, Danny T, 1996. " Convergence Empirics across Economies with (Some) Capital Mobility," Journal of Economic Growth, Springer, vol. 1(1), pages 95-124, March.
  19. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  20. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
  21. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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Citations

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Cited by:
  1. Rosa Capolupo, . "The New Growth Theoris and their Empirics," Working Papers 2005_4, Business School - Economics, University of Glasgow.
  2. Charles Leung & Sam Tang & Nicolaas Groenewold, 2006. "Growth Volatility and Technical Progress: A Simple Rent-seeking Model," Journal of Economics, Springer, vol. 88(2), pages 159-178, 08.
  3. Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," Working Papers 98-01-012, Santa Fe Institute.
  4. Warwick J. McKibbin & David Pearce & Alison Stagman, 2004. "Long Run Projections for Climate Change Scenarios," Economics and Environment Network Working Papers 0405, Australian National University, Economics and Environment Network.
  5. Korosteleva, J & Lawson, Colin, 2009. "The Belarusian Case of Transition: Whither Financial Repression?," Department of Economics Working Papers 15974, University of Bath, Department of Economics.
  6. Rosa Capolupo, 2005. "THE NEW GROWTH THEORIES AND THEIR EMPIRICS, Discussion Paper in Economics, University of Glasgow, N. 2005-04 (http://www.gla.ac.uk/Acad/Economics," GE, Growth, Math methods 0506003, EconWPA.
  7. Richard E. Baldwin & Philippe Martin, 1999. "Two Waves of Globalisation: Superficial Similarities, Fundamental Differences," NBER Working Papers 6904, National Bureau of Economic Research, Inc.
  8. Enrique Lopez Bazo & Esther Vaya Valcarce & Antonio Jose Mora & Jordi Surinach Caralt, 1997. "Regional economic dynamics and convergence in the european union," Working Papers in Economics 12, Universitat de Barcelona. Espai de Recerca en Economia.

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