Galton's Fallacy and Tests of the Convergence Hypothesis
Recent tests for the convergence hypothesis derive from regressing average growth rates on initial levels: a negative initial level coefficient is interpreted as convergence. These tests turn out to be plagued by Galton's classical fallacy of regression towards the mean. Using a dynamic version of Galton's fallacy, the author establishes that coefficients of arbitrary signs in such regressions are consistent with an unchanging cross-section distribution of incomes. Alternative, more direct empirics used here show a tendency for divergence, rather than convergence, of cross-country incomes. Copyright 1993 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 95 (1993)
Issue (Month): 4 (December)
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