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Convergence Clubs and Subsistence Economies

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Author Info
Dan Ben-David

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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 neoclassical 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6267.

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Date of creation: Nov 1997
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Handle: RePEc:nbr:nberwo:6267

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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

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  5. Ben-David, D., 1995. "Convergence Clubs and Diverging Economies," Papers 40-95, Tel Aviv.
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  6. 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)
  7. 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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  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. Philip Kostov & John Lingard, 2004. "Subsistence Agriculture in Transition Economies: its Roles and Determinants," Others 0410004, EconWPA. [Downloadable!]
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  4. Ashok Guha & Brishti Guha, 2008. "Utility functions, future consumption targets and subsistence thresholds," Economics Bulletin, Economics Bulletin, vol. 4(30), pages 1-4. [Downloadable!]
  5. Alice FABRE & Emmanuelle AUGERAUD-VERON, 2004. "Education, Poverty and Child Labour," Econometric Society 2004 Far Eastern Meetings 738, Econometric Society. [Downloadable!]
  6. Toni Mora, 2005. "Conditioning factors on regional European clubs - a distributional approach," ERSA conference papers ersa05p302, European Regional Science Association. [Downloadable!]
  7. 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!]
  8. 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!]
  9. 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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  10. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank. [Downloadable!]
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  11. Xubei Luo, 2004. "The role of infrastructure investment location in China's western development," Policy Research Working Paper Series 3345, The World Bank. [Downloadable!]
  12. Brishti Guha & Ashok S. Guha, 2008. "Utility functions, future consumption targets and subsistence thresholds," Working Papers 16-2008, Singapore Management University, School of Economics. [Downloadable!]
  13. 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!]
  14. 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!]
  15. Philipp Harms, 2001. "International investment in a model of stochastic growth and development traps," Journal of Economics, Springer, vol. 74(2), pages 131-155, June. [Downloadable!] (restricted)
  16. Irz, Xavier & Roe, Terry, 2000. "Growth Pattern, Sustainability And Trade In A Land Constrained Economy," 2000 Annual meeting, July 30-August 2, Tampa, FL 21762, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  17. Strulik, Holger, 2008. "Voracity and Growth Reconsidered," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-401, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
  18. Holger Strulik, 2005. "Geography, Health, and Demo-Economic Development," Discussion Papers 05-15, University of Copenhagen. Department of Economics. [Downloadable!]
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