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On the Mechanics of Economic Convergence

  • Thomas M. Steger

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.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2006.00158.x
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Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 7 (2006)
Issue (Month): (08)
Pages: 317-337

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Handle: RePEc:bla:germec:v:7:y:2006:i::p:317-337
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  1. Charles I. Jones & John C. Williams, . "Too Much of a Good Thing? The Economics of Investment in R&D," Working Papers 95006, Stanford University, Department of Economics.
  2. Barro, Robert J, 1999. " Notes on Growth Accounting," Journal of Economic Growth, Springer, vol. 4(2), pages 119-37, June.
  3. Steger, Thomas M., 2007. "Flexibility, Sectoral Hysteresis, And Downturns," Macroeconomic Dynamics, Cambridge University Press, vol. 11(01), pages 128-148, February.
  4. 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, 02.
  5. 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 383-99, June.
  6. Eicher, Theo S & Turnovsky, Stephen J, 1999. " Convergence in a Two-Sector Nonscale Growth Model," Journal of Economic Growth, Springer, vol. 4(4), pages 413-28, December.
  7. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
  8. de la Fuente, Angel, 1996. "On the Sources of Convergence: A Close Look at the Spanish Regions," CEPR Discussion Papers 1543, C.E.P.R. Discussion Papers.
  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. 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.
  11. 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.
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