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GROWTH AND CONVERGENCE, 1950-2003. What Can We Learn from the Solow Model?

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  • KARRAS, Georgios

Abstract

This paper shows that the Solow model’s predictions are consistent with the data. The standard of living is correlated positively with saving rates and negatively with population growth rates, while just these two variables explain jointly 67% to 73% of the sample’s cross-country variation. The empirical findings clearly reject absolute convergence in income per capita but are very strongly supportive of conditional convergence at an estimated average annual rate of 0.8% to 1.2% a year. It is also shown that the speed of convergence is far from constant over time: it has been mostly increasing during 1960-1990, but it has been falling since the early 1990s.

Suggested Citation

  • KARRAS, Georgios, 2008. "GROWTH AND CONVERGENCE, 1950-2003. What Can We Learn from the Solow Model?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 5-18.
    • Handle: RePEc:eaa:aeinde:v:8:y:2008:i:1_1
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    References listed on IDEAS

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    1. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, December.
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    6. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    7. Karras, Georgios, 2003. "Trade Openness And Economic Growth Can We Estimate The Precise Effect?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 3(1).
    8. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    9. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72, National Bureau of Economic Research, Inc.
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    Cited by:

    1. ESCOBARI, Diego, 2011. "Testing for Stochastic and Beta-convergence in Latin American Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
    2. ANDRADE, Carlos & PINHO, Carlos & PINHO, Maria de Fátima, 2010. "Exploring Regional Convergence: Evidence From 19 European Countries, 1991-2008," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).

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    More about this item

    Keywords

    Solow Model; Economic Growth; Convergence;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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