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The Elusive Empirical Shadow of Growth Convergence

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  • Peter C.B. Phillips

    ()
    (Yale University, Cowles Foundation)

  • Donggyu Sul

    ()
    (University of Auckland, Faculty of Business & Economics, Department of Economics)

Abstract

Two groups of applied econometricians have figured prominently in empirical studies of growth convergence. In terms of a popular caricature, one group believes it has found a black hat of convergence (evidence for growth convergence) in the dark room of economic growth, even though the hat may not exist (the task may be futile). A second group believes it has found a black coat of divergence (evidence against growth convergence) even though this object also may not exist (empirical reality, including the nature of growth divergence, is ever more complex than the models used to characterize it). The present paper seeks to light a candle to see whether there is a hat, a coat or another object of identifiable clothing in the room of regional and multi-country economic growth. After our examination, we find that the candle power of applied econometrics is too low to clearly distinguish a black hat in the huge dark room of economic growth. However, in our theory model, we find an important new role for heterogeneity over time and across economies in the transitional dynamics of economic growth; and, in our empirical work, these transitional dynamics reveal an elusive shadow of the conditional convergence hat in both US regional and inter-country OECD growth patterns.

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Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm342.

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Date of creation: 28 Jul 2004
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Handle: RePEc:ysm:somwrk:ysm342

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Web page: http://icf.som.yale.edu/
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Related research

Keywords: Convergence Parameter; Conditional Convergence; Economic Growth; Growth Convergence; Heterogeneity; Neoclassical Economics; Transition Measures;

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Cited by:
  1. Cohen-Cole, Ethan B. & Durlauf, Steven N. & Rondina, Giacomo, 2012. "Nonlinearities in growth: From evidence to policy," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 42-58.
  2. Nicholas Apergis & Christina Christou & Stephen Miller, 2012. "Convergence patterns in financial development: evidence from club convergence," Empirical Economics, Springer, vol. 43(3), pages 1011-1040, December.
  3. Cristina Brasili & Luciano Gutierrez, 2004. "Regional convergence across European Union," Development and Comp Systems 0402002, EconWPA.
  4. Nicholas Apergis & Puja Padhi, 2013. "Health expenses and economic growth: convergence dynamics across the Indian States," International Journal of Health Care Finance and Economics, Springer, vol. 13(3), pages 261-277, December.
  5. Peter C. B. Phillips & Donggyu Sul, 2009. "Economic transition and growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1153-1185.
  6. Deockhyun Ryu & Mahmoud A. El-Gamal, 2004. "Convergence Hypotheses are Ill-Posed:Non-stationarity of Cross-Country Income Distribution D," Econometric Society 2004 Far Eastern Meetings 576, Econometric Society.
  7. Mauro Costantini & Claudio Lupi, 2005. "Stochastic convergence among European economies," Economics Bulletin, AccessEcon, vol. 3(38), pages 1-17.
  8. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(1), pages 1-72.
  9. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
  10. Tong, Jian, 2006. "The long wave of conditional convergence," Discussion Paper Series In Economics And Econometrics 0614, Economics Division, School of Social Sciences, University of Southampton.
  11. Christophe Hurlin & Valérie Mignon, 2006. "Une Synthèse des Tests de Racine Unitaire sur Données de Panel," Post-Print halshs-00078770, HAL.
  12. repec:ebl:ecbull:v:3:y:2005:i:38:p:1-17 is not listed on IDEAS
  13. Fernando Ruiz, 2006. "Convergence de l'impôt sur les sociétés dans l’Union européenne," Économie et Prévision, Programme National Persée, vol. 173(2), pages 79-96.
  14. Roberto Duncan & J. Rodrigo Fuentes, 2005. "Convergencia Regional en Chile: Nuevos Tests, Viejos Resultados," Working Papers Central Bank of Chile 313, Central Bank of Chile.

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