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Globalization and Income Convergence

Author

Listed:
  • Kaitlyn R. Wolf

    (West Virginia University, College of Business and Economics)

  • Andrew T. Young

    (West Virginia University, College of Business and Economics)

Abstract

The income convergence literature suggests that poor countries can catch-up to rich ones conditional on sharing certain characteristics with rich countries. Good institutions such as strong property rights and rule-of-law are key amongst those characteristics. From a policy perspective this is disheartening because economists have little understanding of how to transplant those institutions to developing countries. Worse, good informal institutions seem to be a necessary condition for formal institutions to "stick". However, to the extent that good institutions can arise as a "spontaneous order" from individuals interacting with one another, allowing for an "open society" may be an effective development policy. To evaluate this proposition we explore whether or not increased globalization fosters income convergence. Based on a panel of up to 184 countries covering the years 1970 to 2009 we conclude that it does. In particular, the social dimension (as opposed to the economic or political dimensions) of globalization is robustly related to income convergence.

Suggested Citation

  • Kaitlyn R. Wolf & Andrew T. Young, 2014. "Globalization and Income Convergence," Working Papers 14-07, Department of Economics, West Virginia University.
  • Handle: RePEc:wvu:wpaper:14-07
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    File URL: http://be.wvu.edu/phd_economics/pdf/14-07.pdf
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    References listed on IDEAS

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    Cited by:

    1. Danko Tarabar & Joshua C. Hall, 2015. "Explaining the Worldwide Decline in Military Conscription: 1970-2010," Working Papers 15-30, Department of Economics, West Virginia University.

    More about this item

    Keywords

    globalization; institutions; income convergence;

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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