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On the Mechanics of Economic Convergence

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  • Thomas M. Steger

Abstract

The speed at which an economy converges to its steady state is investigated by using a general non-scale R&D-based growth model. To accomplish this task, an analytical decomposition formula for the instantaneous rate of convergence is developed. By applying this decomposition to the model under study, the driving forces behind the convergence process are identified. Two convergence mechanisms are distinguished: the accumulation-decumulation mechanism and the resource-reallocation mechanism. The relative importance of the different convergence mechanisms is assessed using numerical techniques. Moreover, it is shown that the specific shock being considered might be crucial for the instantaneous rate of convergence. Copyright Verein für Socialpolitik and Blackwell Publishing Ltd. 2006.

Suggested Citation

  • Thomas M. Steger, 2006. "On the Mechanics of Economic Convergence," German Economic Review, Verein für Socialpolitik, vol. 7, pages 317-337, August.
  • Handle: RePEc:bla:germec:v:7:y:2006:i::p:317-337
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    References listed on IDEAS

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    1. de la Fuente, Angel, 2002. "On the sources of convergence: A close look at the Spanish regions," European Economic Review, Elsevier, vol. 46(3), pages 569-599, March.
    2. Eicher, Theo S. & Turnovsky, Stephen J., 2001. "Transitional dynamics in a two-sector non-scale growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 85-113, January.
    3. Jones, Charles I & Williams, John C, 2000. "Too Much of a Good Thing? The Economics of Investment in R&D," Journal of Economic Growth, Springer, vol. 5(1), pages 65-85, March.
    4. Barro, Robert J, 1999. "Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-137, June.
    5. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    6. Theo S. Eicher & Stephen J. Turnovsky & Uwe Walz, 2000. "Optimal Policy for Financial Market Liberalizations: Decentralization and Capital Flow Reversals," German Economic Review, Verein für Socialpolitik, vol. 1(1), pages 19-42, February.
    7. Thomas M. Steger, 2005. "Welfare Implications of Non-scale R&D-based Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 737-757, December.
    8. Eicher, Theo S & Turnovsky, Stephen J, 1999. "Convergence in a Two-Sector Nonscale Growth Model," Journal of Economic Growth, Springer, vol. 4(4), pages 413-428, December.
    9. Eicher, Theo S & Turnovsky, Stephen J, 1999. "Non-scale Models of Economic Growth," Economic Journal, Royal Economic Society, vol. 109(457), pages 394-415, July.
    10. Steger, Thomas M., 2007. "Flexibility, Sectoral Hysteresis, And Downturns," Macroeconomic Dynamics, Cambridge University Press, vol. 11(01), pages 128-148, February.
    11. Ortigueira, Salvador & Santos, Manuel S, 1997. "On the Speed of Convergence in Endogenous Growth Models," American Economic Review, American Economic Association, vol. 87(3), pages 383-399, June.
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    Cited by:

    1. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
    2. Valente, Simone, 2008. "Intergenerational transfers, lifetime welfare, and resource preservation," Environment and Development Economics, Cambridge University Press, vol. 13(01), pages 53-78, February.
    3. Simone Valente, 2006. "Trade, Envy and Growth: International Status Seeking in a Two-Country World," CER-ETH Economics working paper series 06/53, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    4. Simone Valente, 2005. "Genuine dissaving and optimal growth," CER-ETH Economics working paper series 05/38, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    JEL classification:

    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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