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On the Mechanics of Economic Convergence

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Author Info
Thomas M. Steger () (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH))

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Abstract

In macroeconomic dynamic models the speed at which output converges to its steady state is of outstanding interest. Theoretical investigations usually focus on the asymptotic speed of convergence only. This procedure is, however, unnecessarily restrictive and hides important information. The paper at hand provides a straightforward and simple analytical decomposition of the instantaneous rate of convergence into its economic determinants. In addition, the resulting convergence-accounting formula is applied to analyse the transition process of a general R&D-based endogenous growth model. As a result, the driving forces behind the convergence process are identified.

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 03/25.

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Length: 35 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:eth:wpswif:03-25

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Related research
Keywords: Convergence accounting; rate of convergence; decomposition; convergence mechanisms; R&D-based growth;

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Find related papers by JEL classification:
O0 - Economic Development, Technological Change, and Growth - - General
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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  6. Eicher, Theo S & Turnovsky, Stephen J, 1999. " Convergence in a Two-Sector Nonscale Growth Model," Journal of Economic Growth, Springer, vol. 4(4), pages 413-28, December. [Downloadable!] (restricted)
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  8. Charles I. Jones & John C. Williams, . "Too Much of a Good Thing? The Economics of Investment in R&D," Working Papers 95006, Stanford University, Department of Economics.
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  9. Theo S. Eicher & Stephen J. Turnovsky & Uwe Walz, 2000. "Optimal Policy for Financial Market Liberalizations: Decentralization and Capital Flow Reversals," German Economic Review, Blackwell Publishing, vol. 1(1), pages 19-42, 02. [Downloadable!] (restricted)
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  11. Eicher, Theo S & Turnovsky, Stephen J, 1999. "Non-scale Models of Economic Growth," Economic Journal, Royal Economic Society, vol. 109(457), pages 394-415, July. [Downloadable!] (restricted)
  12. Jonathan Temple, 2003. "The Long-Run implications of Growth Theories," Journal of Economic Surveys, Blackwell Publishing, vol. 17(3), pages 497-510, 07. [Downloadable!] (restricted)
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(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.)

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