Worldwide Growth Convergence in the New Millennium: An Empirical Investigation

Economic growth is an important ingredient for reducing poverty and achieving the Millennium Development Goals proposed by United Nations in 2000. Meeting these goals by the proposed 2015 target data depends on the ability of poor nations to grow their economies and improve their standards of living. Neoclassical and new growth theory suggests that there should be a negative relationship between a nation’s initial income and subsequent growth giving rise to either absolute convergence (income levels of all nations converge over time) or conditional convergence (each nation converges to its unique steady-state income level). Using the most recent (2000-2013) World Bank data and cross-country regression techniques, I evaluated whether convergence has been occurring in the world in the last decade. My results showed a robust negative relationship between starting income level and subsequent growth. Savings and education were also associated with growth whereas trade was not. Overall, these results support the notion of convergence which is an encouraging finding as the world approaches the 2015 post-development agenda.