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A Meta-Analysis of Beta-Convergence: The Legendary Two-Percent

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Author Info
Maria Abreu () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)
Henri L.F. de Groot () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)
Raymond J.G.M. Florax () (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam, and Purdue University)

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Abstract

The topic of convergence is at the heart of a wide-ranging debate in the growth literature. Empirical studies of convergence differ widely in their theoretical backgrounds, empirical specifications and in their treatment of cross-sectional heterogeneity. Despite these differences, a rate of convergence of about 2% has been found under a variety of different conditions, resulting in the widespread belief that the rate of convergence is a natural constant. We use meta-analysis to investigate whether there is substance to the ‘myth’ of the legendary 2% convergence rate, and to assess several unresolved issues of interpretation and estimation. Our dataset contains approximately 600 estimates taken from a random sample of empirical growth studies published in peer-reviewed journals. We show that publication bias does not interfere with the analysis, and that it is misleading to speak of a natural convergence rate, since estimates of different growth regression! s come from different populations. We find that correcting for the bias resulting from unobserved heterogeneity in technology levels leads to higher estimates of the rate of convergence. We also find that correcting for endogeneity in the explanatory variables has a substantial effect on the estimates, and that measures of financial and fiscal development are important determinants of long-run differences in per-capita income levels.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-001/3.

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Date of creation: 05 Jan 2005
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Handle: RePEc:dgr:uvatin:20050001

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Keywords: economic growth; convergence; meta-analysis;

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Find related papers by JEL classification:
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General

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  1. David, DE LA CROIX & Axel, GOSSERIES, 2006. "Procreation, migration and tradable quotas," Discussion Papers (ECON - Département des Sciences Economiques) 2006056, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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  2. T.D Stanley & Hristos Doucouliagos, 2007. "Identifying and Correcting Publication Selection Bias in the Efficiency-Wage Literature: Heckman Meta-Regression," Economics Series 2007_11, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  3. Su Wu, 2006. "The Wallis Report and Implications of Bank Mergers for Efficiencies," Economics Series 2006_12, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  4. T.D. Stanley & Chris Doucouliagous & Stephen B. Jarrell, 2006. "Meta-Regression Analysis as the Socio-Economics of Economic Research," Economics Series 2006_21, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
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  5. Brigitte Waldorf, 2005. "The Emergence Of A Knowledge Agglomeration: A Spatio-Temporal Analysis Of Intellectual Capital In Indiana," ERSA conference papers ersa05p558, European Regional Science Association. [Downloadable!]
  6. Hristos Doucouliagos & T.D. Stanley, 2008. "Theory Competition and Selectivity: Are All Economic Facts Greatly Exaggerated?," Economics Series 2008_06, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  7. David, DE LA CROIX & Clara, DELAVALLADE, 2006. "Growth, public investment and corruption with failing institutions," Discussion Papers (ECON - Département des Sciences Economiques) 2006057, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
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