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Convergence Clubs and Subsistence Economies

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Ben-David, Dan

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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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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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Find related papers by JEL classification:
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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  3. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May. [Downloadable!] (restricted)
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  5. 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. [Downloadable!] (restricted)
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  7. Tamura, Robert, 1994. "Fertility, Human Capital and the Wealth of Families," Economic Theory, Springer, vol. 4(4), pages 593-603, May.
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  12. Romer, Paul M, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephane Adjemian & Jerome Glachant & Charles Vellutini, 2000. "Regional Convergence and Aggregate Growth," Econometric Society World Congress 2000 Contributed Papers 1518, Econometric Society. [Downloadable!]
  2. Don Webber & Paul White, 2003. "Regional Factor Price Convergence Across Four Major European Countries," Regional Studies, Taylor and Francis Journals, vol. 37(8), pages 773-782, November. [Downloadable!] (restricted)
  3. Xubei Luo, 2004. "The role of infrastructure investment location in China's western development," Policy Research Working Paper Series 3345, The World Bank. [Downloadable!]
  4. Philip Kostov & John Lingard, 2004. "Subsistence Agriculture in Transition Economies: its Roles and Determinants," Others 0410004, EconWPA. [Downloadable!]
  5. Chowdhury, Khorshed, 2004. "Convergence of Per Capita GDP Across SAARC Countries," Economics Working Papers wp04-07, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]
  6. Alice FABRE & Emmanuelle AUGERAUD-VERON, 2004. "Education, Poverty and Child Labour," Econometric Society 2004 Far Eastern Meetings 738, Econometric Society. [Downloadable!]
  7. Chowdhury, K, 2005. "What´s Happening to Per Capita Gdp in the ASEAN Countries?. An Analysis of Convergence, 1960-2001," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(3). [Downloadable!] (restricted)
  8. Toni Mora, 2005. "Conditioning factors on regional European clubs - a distributional approach," ERSA conference papers ersa05p302, European Regional Science Association. [Downloadable!]
  9. Donald S. Allen & Leonce Ndikumana, 1999. "Income inequality and minimum consumption: implications for growth," Working Papers 1999-013, Federal Reserve Bank of St. Louis. [Downloadable!]
  10. Chowdhury, Khorshed & Mallik, Girijasankar, 2007. "SPair-Wise Output Convergence in East Asia and the Pacific: An Application of Stochastic Unit Root Test," Economics Working Papers wp07-07, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]
  11. Strulik, Holger, 2008. "Voracity and Growth Reconsidered," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-401, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  12. Chang-Tai Hsieh & Peter J. Klenow, 2003. "Relative prices and relative prosperity," Proceedings, Federal Reserve Bank of San Francisco, issue Nov. [Downloadable!]
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  13. Holger Strulik, 2005. "Geography, Health, and Demo-Economic Development," Discussion Papers 05-15, University of Copenhagen. Department of Economics. [Downloadable!]
  14. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank. [Downloadable!]
    Other versions:
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