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Convergence and Modernization Revisited

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  • Robert J. Barro

Abstract

In an 80-country panel since the 1960s, the convergence rate for per capita GDP is around 1.7% per year. This “beta convergence” is conditional on an array of explanatory variables that hold constant countries’ long-run characteristics. The introduction of country fixed effects generates a much higher–and, I argue, misleading–convergence rate. In a much longer time frame–34 countries with GDP data starting between 1870 and 1896–estimation with country fixed effects is more appropriate, and the estimated convergence rate is around 2.4% per year. Combining the point estimates from the post-1960s and post-1870 panels suggests that the conditional convergence rate is between 1.7% and 2.4% per year, an interval that contains the “iron-law” rate of 2%. In the post-1960s panel, estimation without country fixed effects supports the modernization hypothesis, in the form of positive effects of per capita GDP and schooling on democracy and maintenance of law and order. The long-term panel with country fixed effects also supports modernization, in the sense of positive effects of per capita GDP and schooling on the Polity indicator for democracy. A measure of dispersion–the standard deviation of the log of per capita GDP across 25 countries–is reasonably stable since 1870. This lack of “sigma convergence” is consistent with the presence of beta convergence. For 34 countries–including China and India–observed since 1896, the dispersion of per capita GDP declines since the late 1970s, especially when the country data are weighted by population. This sigma convergence reflects particularly the incorporation of China and India into the world market economy. For 29 countries since 1919, the levels and trends in cross-country dispersion are similar for consumption and GDP.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18295.

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Date of creation: Aug 2012
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Handle: RePEc:nbr:nberwo:18295

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Cited by:
  1. Carolyn Chisadza & Manoel Bittencourt, 2014. "Is Democracy Eluding Sub-Saharan Africa?," Working Papers 201403, University of Pretoria, Department of Economics.
  2. Mogens Justesen & Peter Kurrild-Klitgaard, 2013. "Institutional interactions and economic growth: the joint effects of property rights, veto players and democratic capital," Public Choice, Springer, Springer, vol. 157(3), pages 449-474, December.
  3. Nicola Gennaioli & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "Growth in Regions," Working Paper 73436, Harvard University OpenScholar.
    • Nicola Gennaioli & Rafael La Porta & Florencio Lopez de Silanes & Andrei Shleifer, 2013. "Growth in Regions," NBER Working Papers 18937, National Bureau of Economic Research, Inc.
  4. Andersen, Thomas Barnebeck & Dalgaard, Carl-Johan, 2013. "Power outages and economic growth in Africa," Energy Economics, Elsevier, Elsevier, vol. 38(C), pages 19-23.
  5. Tausch, Arno, 2013. "The hallmarks of crisis. A new center-periphery perspective on long cycles," MPRA Paper 48356, University Library of Munich, Germany.
  6. Olper, Alessandro & Pacca, Lucia & Curzi, Daniele, 2013. "Trade, Import Competition and Productivity Growth In the Food Industry," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain, International Agricultural Trade Research Consortium 152383, International Agricultural Trade Research Consortium.
  7. Ghani, Ejaz & O'Connell, Stephen D., 2014. "Can service be a growth escalator in low-income countries ?," Policy Research Working Paper Series 6971, The World Bank.
  8. Filipe R. Campante & David H. Yanagizawa-Drott, 2013. "Does Religion Affect Economic Growth and Happiness? Evidence from Ramadan," NBER Working Papers 19768, National Bureau of Economic Research, Inc.
  9. Parteka, Aleksandra & Wolszczak-Derlacz, Joanna, 2013. "Integrated Sectors - Diversified Earnings: The (Missing) Impact of Offshoring on Wages and Wage Convergence in the EU27," Institute for Research on Labor and Employment, Working Paper Series, Institute of Industrial Relations, UC Berkeley qt3tm2935j, Institute of Industrial Relations, UC Berkeley.
  10. Gordon C. McCord & Jeffrey D. Sachs, 2013. "Development, Structure, and Transformation: Some Evidence on Comparative Economic Growth," NBER Working Papers 19512, National Bureau of Economic Research, Inc.
  11. Barbara Kotschwar, 2014. "Women, Sports, and Development: Does It Pay to Let Girls Play?," Policy Briefs PB14-8, Peterson Institute for International Economics.
  12. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2014. "Democracy Does Cause Growth," NBER Working Papers 20004, National Bureau of Economic Research, Inc.

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