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Convergence Clubs and Subsistence Economies

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  • Ben-David, Dan

Abstract

This paper focuses on one possible explanation for the empirical evidence of: (a) income convergence among the world’s poorest countries and among its wealthiest countries; and (b) income divergence among most of the remaining countries. The model incorporates the assumption of subsistence consumption into the neo-classical exogenous growth model – yielding outcomes that are consistent with the convergence-divergence empirical evidence. While subsistence consumption can lead to negative saving and disaccumulation of capital, it can also coincide with positive saving and accumulation of capital. The model predicts that the poorer the country, the lower its saving rate, a result that also appears to be borne out by the evidence provided here.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1745.

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Date of creation: Nov 1997
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Handle: RePEc:cpr:ceprdp:1745

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Keywords: Convergence; Growth; Subsistence Consumption;

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  1. Danny Quah, 1992. "Empirical Cross-Section Dynamics in Economic Growth," FMG Discussion Papers dp154, Financial Markets Group.
  2. Becker, Gary S & Murphy, Kevin M & Tamura, Robert, 1990. "Human Capital, Fertility, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S12-37, October.
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  4. Tamura, Robert, 1994. "Fertility, Human Capital and the Wealth of Families," Economic Theory, Springer, vol. 4(4), pages 593-603, May.
  5. Ben-David, Dan, 1994. "Convergence Clubs and Diverging Economies," CEPR Discussion Papers 922, C.E.P.R. Discussion Papers.
  6. Rebelo, Sérgio, 1992. "Growth in Open Economies," CEPR Discussion Papers 667, C.E.P.R. Discussion Papers.
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  8. Tamura, Robert, 1996. "From decay to growth: A demographic transition to economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1237-1261.
  9. Robert W. Fogel, 1994. "The Relevance of Malthus for the Study of Mortality Today: Long-Run Influences on Health, Mortality, Labor Force Participation, and Population Growth," NBER Historical Working Papers 0054, National Bureau of Economic Research, Inc.
  10. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
  11. Brezis, Elise S & Krugman, Paul R & Tsiddon, Daniel, 1993. "Leapfrogging in International Competition: A Theory of Cycles in National Technological Leadership," American Economic Review, American Economic Association, vol. 83(5), pages 1211-19, December.
  12. Ehrlich, Isaac & Lui, Francis T, 1991. "Intergenerational Trade, Longevity, and Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1029-59, October.
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