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Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics

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  • Caselli, Francesco
  • Esquivel, Gerardo
  • Lefort, Fernando

Abstract

There are two sources of inconsistency in existing cross-country empirical work on growth: correlated individual effects and endogenous explanatory variables. We estimate a variety of cross-country growth regressions using a generalized method of moments estimator that eliminates both problems. In one application, we find that per capita incomes converge to their steady-state levels at a rate of approximately 10 percent per year. This result stands in sharp contrast to the current consensus, which places the convergence rate at 2 percent. We discuss the theoretical implications of this finding. In another application, we perform a test of the Solow model. Again, contrary to prior results, we reject both the standard and the augmented version of the model. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. "Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-389, September.
  • Handle: RePEc:kap:jecgro:v:1:y:1996:i:3:p:363-89
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