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Economic transition and growth

  • Peter C. B. Phillips

    (Yale University, New Haven, CT, USA; University of Auckland, New Zealand; University of York, UK; and Singapore Management University, Singapore)

  • Donggyu Sul

    (Department of Economics, University of Texas at Dallas, USA)

Some extensions of neoclassical growth models are discussed that allow for cross-section heterogeneity among economies and evolution in rates of technological progress over time. The models offer a spectrum of transitional behavior among economies that includes convergence to a common steady-state path as well as various forms of transitional divergence and convergence. Mechanisms for modeling such transitions, measuring them econometrically, assessing group behavior and selecting subgroups are developed in the paper. Some econometric issues with the commonly used augmented Solow regressions are pointed out, including problems of endogeneity and omitted variable bias which arise under conditions of transitional heterogeneity. Alternative regression methods for analyzing economic transition are given which lead to a new test of the convergence hypothesis and a new procedure for detecting club convergence clusters. Transition curves for individual economies and subgroups of economies are estimated in a series of empirical applications of the methods to regional US data, OECD data and Penn World Table data. Copyright © 2009 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.1080
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 24 (2009)
Issue (Month): 7 ()
Pages: 1153-1185

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Handle: RePEc:jae:japmet:v:24:y:2009:i:7:p:1153-1185
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  1. Peter C.B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Cowles Foundation Discussion Papers 1595, Cowles Foundation for Research in Economics, Yale University.
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