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A test of the international convergence hypothesis using panel data

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  • Loayza, Norman V.
  • DEC

Abstract

The author, using a neoclassical Solow model, estimates an economy's rate of convergence to its own steady state. Using panel date for a sample of 98 countries, the author applies Chamberlain's (1984) estimation procedures to account for the presence of country-specific effects resulting from idiosyncratic unobservable factors. This procedure also prevents the estimation bias due to measurement error in the Gross Domestic Product. Controlling, additionally, for the country's level of education, the author estimates the rate of convergence to be 0.0494, which implies a half-life of about 14 years. This estimated rate of convergence is about two and a half times higher than those obtained by Barro and Salai-Martin (1992) and Makiw, Romer, and Weil (1992). The author claims that those estimates are biased toward zero because they fail to account for country specific effects. Finally, the author estimates the capital share in production to be 0.374, which is very close to the accepted benchmark value.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1333.

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Date of creation: 31 Aug 1994
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Handle: RePEc:wbk:wbrwps:1333

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Related research

Keywords: Economic Theory&Research; Environmental Economics&Policies; Inequality; Health Monitoring&Evaluation; Economic Growth;

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Cited by:
  1. Aiello, Francesco & Scoppa, Vincenzo, 2008. "Convergence and Regional Productivity Divide in Italy: Evidence from Panel Data," MPRA Paper 17343, University Library of Munich, Germany.
  2. Markus Eberhardt & Francis Teal, 2011. "Econometrics For Grumblers: A New Look At The Literature On Cross‐Country Growth Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 109-155, 02.
  3. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
  4. Fajnzylber, Pablo & Lederman, Daniel, 1999. "Economic reforms and total factor productivity growth in Latin America and the Caribbean (1950-95) - an empirical note," Policy Research Working Paper Series 2114, The World Bank.
  5. Llussa, Fernanda, 2007. "Geography Matters More: Geographical and Institutional Determinants of Income in Brazilian States," FEUNL Working Paper Series wp517, Universidade Nova de Lisboa, Faculdade de Economia.
  6. Martín-Mayoral, Fernando, 2008. "¿Existe convergencia entre los países de América Latina?
    [Exist convergence across Latinamerican countries]
    ," MPRA Paper 16039, University Library of Munich, Germany.
  7. Llussa, Fernanda, 2007. "Cross-Country Analyses of Economic Growth: An Econometric Survey," FEUNL Working Paper Series wp518, Universidade Nova de Lisboa, Faculdade de Economia.
  8. Felipe, Jesus., 2006. "A decade of debate about the sources of growth in East Asia. How much do we know about why some countries grow faster than others?/Una década de debate sobre las fuentes del crecimiento en el Este As," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 24, pages 181-220, Abril.

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