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The new evidence to tendency of convergence in Solow model

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  • Chen, Kai
  • Gong, Xiaoju
  • Marcus, Richard D.

Abstract

This paper tests the hypothesis in the revised endogenous dynamic Solow model that there exists dynamic convergence to the moving steady-state as a single economy grows. The convergence in the revised endogenous dynamic Solow model implies that the real interest rate and the growth rate of income per capita in an economy would move together, i.e., they would be cointegrated in empirical terms. Taking the U.S. economy as our research subject, we test this hypothesis by investigating the cointegration between the U.S. real interest rate and its growth rate of income per capita during a fifty-year period from 1951 to 2000. Our results show that the U.S. real interest rate and its growth rate of income per capita move together over time, providing strong evidence to support the dynamic convergence hypothesis.

Suggested Citation

  • Chen, Kai & Gong, Xiaoju & Marcus, Richard D., 2014. "The new evidence to tendency of convergence in Solow model," Economic Modelling, Elsevier, vol. 41(C), pages 263-266.
    • Handle: RePEc:eee:ecmode:v:41:y:2014:i:c:p:263-266
    DOI: 10.1016/j.econmod.2014.02.029
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    References listed on IDEAS

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    1. Luintel, Kul B & Matthews, Kent & Minford, Lucy & Valentinyi, Akos & Wang, Baoshun, 2020. "The role of Provincial Government Spending Composition in growth and convergence in China," Economic Modelling, Elsevier, vol. 90(C), pages 117-134.
    2. Li, Kui-Wai & Zhou, Xianbo & Pan, Zhewen, 2016. "Cross-country output convergence and growth: Evidence from varying coefficient nonparametric method," Economic Modelling, Elsevier, vol. 55(C), pages 32-41.
    3. Shamima Nasrin & Angathevar Baskaran & Rajah Rasiah, 2017. "Microfinance and savings among the poor: evidence from Bangladesh microfinance sector," Quality & Quantity: International Journal of Methodology, Springer, vol. 51(4), pages 1435-1448, July.
    4. Sławomir Pastuszka & Jurand Skrzypek, 2017. "Konwergencja czy dywergencja regionów włoskich?," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 101-130.
    5. Pastuszka, Sławomir & Skrzypek, Jurand, . "Konwergencja czy dywergencja regionów włoskich?," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2017(2).

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