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Detecting Technological Catch-Up In Economic Convergence

  • Pigliaru, Francesco

We address the problem of measuring, in the absence of reliable indices of technology levels, how much of the convergence we observe is due to convergence in technology or in capital-labour ratios. We first develop a growth model where technology accumulation in lagging economies depends on their propensity to innovate and on technological spillovers, with convergence due both to capital-deepening and to technological diffusion. Then we study the transitional dynamics of the model to show how to discriminate empirically between the following three hypotheses: (i) convergence is due to capital-deepening with technology levels uniform across economies, as in Mankiw, Romer and Weil; (ii) convergence is due to capital-deepening with stationary differences in individual technologies, as in Islam; (iii) convergence is due to both technological catch-up and capital-deepening. Our main findings are as follows. First, we show that it may be difficult to distinguish between hypotheses (ii) and (iii) in cross-section or panel data. This problem has often been overlooked in the empirical literature on convergence. Second, we suggest how the problem can be overcome by noting that hypothesis (iii) does (and hypothesis (ii) does not) imply that the initial differences in technology levels may tend to decrease over time. A careful analysis of the fixed-effects estimates obtained by means of panel data methodology proposed in Islam should allow researchers to discriminate between the two competing hypotheses. Copyright Blackwell Publishing Ltd 2003.

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa00p21.

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Date of creation: Aug 2000
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Handle: RePEc:wiw:wiwrsa:ersa00p21
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  1. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  2. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  3. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  4. Jan Fagerberg & Bart Verspagen & Marjolein Cani�ls, 1997. "Technology, Growth and Unemployment across European Regions," Regional Studies, Taylor & Francis Journals, vol. 31(5), pages 457-466.
  5. Maurizio Pugno, 1993. "On Competing Theories of Economic Growth: a Cross-country Evidence," Department of Economics Working Papers 9309, Department of Economics, University of Trento, Italia.
  6. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  7. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  8. Robert J. Barro & Xavier Sala-i-Martin, 1995. "Technological diffusion, convergence and growth," Economics Working Papers 116, Department of Economics and Business, Universitat Pompeu Fabra.
  9. Charles I. Jones, . "Convergence Revisited," Working Papers 96006, Stanford University, Department of Economics.
  10. Nazrul Islam, 1998. "Growth Empirics: A Panel Data Approach- A Reply," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 325-329, February.
  11. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  12. Kevin Lee & M. Hashem Pesaran & Ron Smith, 1998. "Growth Empirics: A Panel Data Approach- A Comment," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 319-323, February.
  13. Bernard, Andrew B & Jones, Charles I, 1996. "Technology and Convergence," Economic Journal, Royal Economic Society, vol. 106(437), pages 1037-44, July.
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