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Detecting Technological Catch-Up in Economic Convergence

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  • Francesco Pigliaru

Abstract

We address the problem of measuring, in the absence of reliable indices of technology levels, how much of the convergence we observe is due to convergence in technology or in capital-labour ratios. We first develop a growth model where technology accumulation in lagging economies depends on their propensity to innovate and on technological spillovers, with convergence due both to capital-deepening and to technological diffusion. Then we study the transitional dynamics of the model to show how to discriminate empirically between the following three hypotheses: (i) convergence is due to capital-deepening with technology levels uniform across economies, as in Mankiw, Romer and Weil; (ii) convergence is due to capital-deepening with stationary differences in individual technologies, as in Islam; (iii) convergence is due to both technological catch-up and capital-deepening. Our main findings are as follows. First, we show that it may be difficult to distinguish between hypotheses (ii) and (iii) in cross-section or panel data. This problem has often been overlooked in the empirical literature on convergence. Second, we suggest how the problem can be overcome by noting that hypothesis (iii) does (and hypothesis (ii) does not) imply that the initial differences in technology levels may tend to decrease over time. A careful analysis of the fixed-effects estimates obtained by means of panel data methodology proposed in Islam should allow researchers to discriminate between the two competing hypotheses. Copyright Blackwell Publishing Ltd 2003.

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  • Francesco Pigliaru, 2003. "Detecting Technological Catch-Up in Economic Convergence," Metroeconomica, Wiley Blackwell, vol. 54(2-3), pages 161-178, May.
  • Handle: RePEc:bla:metroe:v:54:y:2003:i:2-3:p:161-178
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    1. Jan Fagerberg & Bart Verspagen & Marjolein Caniëls, 1997. "Technology, Growth and Unemployment across European Regions," Regional Studies, Taylor & Francis Journals, vol. 31(5), pages 457-466.
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    6. Bernard, Andrew B & Jones, Charles I, 1996. "Technology and Convergence," Economic Journal, Royal Economic Society, vol. 106(437), pages 1037-1044, July.
    7. 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.
    8. Barro, Robert J & Sala-i-Martin, Xavier, 1997. "Technological Diffusion, Convergence, and Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 1-26, March.
    9. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    10. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
    11. Nazrul Islam, 1998. "Growth Empirics: A Panel Data Approach—A Reply," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 325-329.
    12. Maurizio Pugno, 1993. "On Competing Theories of Economic Growth: a Cross-country Evidence," Department of Economics Working Papers 9309, Department of Economics, University of Trento, Italia.
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    Cited by:

    1. M. Musumeci, 2000. "Innovazione tecnologica e beni culturali. Uno studio sulla situazione della Sicilia," Working Paper CRENoS 200008, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    2. LR. Keller & E. Strazzera, 2000. "Examining predictive models among discounting models," Working Paper CRENoS 200005, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. R. Carcangiu & G. Sistu & S. Usai, 1999. "Struttura socio-economica dei comuni della Sardegna. Suggerimenti da un'analisi cluster," Working Paper CRENoS 199903, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. C. Antonelli & R. Marchionatti & S. Usai, 2000. "Productivity and External Knowledge: The Italian Case," Working Paper CRENoS 200009, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    5. Palan, Nicole & Schmiedeberg, Claudia, 2010. "Structural convergence of European countries," Structural Change and Economic Dynamics, Elsevier, vol. 21(2), pages 85-100, May.
    6. Silvia Dal Bianco, 2010. "Technology Diffusion or Capital Accumulation? An Empirical Assessment of Convergence in Manufacturing," Quaderni di Dipartimento 114, University of Pavia, Department of Economics and Quantitative Methods.
    7. Adriana Di Liberto & Francesco Pigliaru & Roberto Mura, 2008. "How to measure the unobservable: a panel technique for the analysis of TFP convergence," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 343-368, April.
    8. Alexiadis Stilianos & Christos Ap. LADIAS, 2011. "Optimal Allocation Of Investment And Regional Disparities," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 45-59, December.
    9. Hartwig, Jochen, 2012. "Testing the growth effects of structural change," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 11-24.
    10. R. Paci & F. Pigliaru, 2001. "Technological Diffusion, Spatial Spillovers And Regional Convergence In Europe," Working Paper CRENoS 200101, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    11. Alexiadis, Stilianos & Tomkins, Judith, 2010. "Technology adoption and club convergence," MPRA Paper 21260, University Library of Munich, Germany.
    12. repec:hrs:journl:v:3:y:2011:i:2:p:45-59 is not listed on IDEAS
    13. R. Naylor, 2001. "Industry profits and market size under bilateral oligopoly," Working Paper CRENoS 200108, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    14. R. Naylor, 2001. "Firm profits and the number of firms under unionised oligopoly," Working Paper CRENoS 200109, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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