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Convergence in the Neo-classical Model of Economic Growth

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  • Rossitsa Rangelova

Abstract

Theoretical foundation of the convergence concept in neo-classical growth model has been analysed. According to that concept, the income per capita growth tends to grow in reverse correlation of income initial level. In fact, however, there is obviously an outspoken lack of convergence in standards of living between developed and less developed countries. The new (endogenous) growth theories offer possible explanations for the observed lack of convergence between rich and poor countries. An empirical study is presented, reviewing 42 countries in the world (including 30 developed and 12 less developed countries) over the period 1900-2005 as well as by divided sub-periods. Special attention is paid to the convergence among EU member states by GDP by per capita in a historical retrospective.

Suggested Citation

  • Rossitsa Rangelova, 2008. "Convergence in the Neo-classical Model of Economic Growth," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 48-66.
  • Handle: RePEc:bas:econth:y:2008:i:6:p:48-66
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    References listed on IDEAS

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    1. Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
    2. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    3. Knack, Steve, 1996. "Institutions and the Convergence Hypothesis: The Cross-National Evidence," Public Choice, Springer, vol. 87(3-4), pages 207-228, June.
    4. Baumol, William J, 1986. "Productivity Growth, Convergence, and Welfare: What the Long-run Data Show," American Economic Review, American Economic Association, vol. 76(5), pages 1072-1085, December.
    5. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
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    More about this item

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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