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The Elusive Empirical Shadow of Growth Convergence

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  • Peter C.B. Phillips

    () (Yale University, Cowles Foundation)

  • Donggyu Sul

    () (University of Auckland, Faculty of Business & Economics, Department of Economics)

Abstract

Two groups of applied econometricians have figured prominently in empirical studies of growth convergence. In terms of a popular caricature, one group believes it has found a black hat of convergence (evidence for growth convergence) in the dark room of economic growth, even though the hat may not exist (the task may be futile). A second group believes it has found a black coat of divergence (evidence against growth convergence) even though this object also may not exist (empirical reality, including the nature of growth divergence, is ever more complex than the models used to characterize it). The present paper seeks to light a candle to see whether there is a hat, a coat or another object of identifiable clothing in the room of regional and multi-country economic growth. After our examination, we find that the candle power of applied econometrics is too low to clearly distinguish a black hat in the huge dark room of economic growth. However, in our theory model, we find an important new role for heterogeneity over time and across economies in the transitional dynamics of economic growth; and, in our empirical work, these transitional dynamics reveal an elusive shadow of the conditional convergence hat in both US regional and inter-country OECD growth patterns.

Suggested Citation

  • Peter C.B. Phillips & Donggyu Sul, 2004. "The Elusive Empirical Shadow of Growth Convergence," Yale School of Management Working Papers ysm342, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm342
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    References listed on IDEAS

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    Cited by:

    1. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-72.
    2. Nicholas Apergis & Christina Christou & Stephen Miller, 2012. "Convergence patterns in financial development: evidence from club convergence," Empirical Economics, Springer, vol. 43(3), pages 1011-1040, December.
    3. Rosa Capolupo, "undated". "The New Growth Theoris and their Empirics," Working Papers 2005_4, Business School - Economics, University of Glasgow.
    4. Peter C. B. Phillips & Donggyu Sul, 2007. "Transition Modeling and Econometric Convergence Tests," Econometrica, Econometric Society, vol. 75(6), pages 1771-1855, November.
    5. Fernando M. M. Ruiz, 2006. "Convergence de l'impôt sur les sociétés dans l'Union E uropéenne," Economie & Prévision, La Documentation Française, pages 79-96.
    6. Mauro Costantini & Claudio Lupi, 2005. "Stochastic convergence among European economies," Economics Bulletin, AccessEcon, vol. 3(38), pages 1-17.
    7. Deockhyun Ryu & Mahmoud A. El-Gamal, 2004. "Convergence Hypotheses are Ill-Posed:Non-stationarity of Cross-Country Income Distribution D," Econometric Society 2004 Far Eastern Meetings 576, Econometric Society.
    8. repec:ebl:ecbull:v:3:y:2005:i:38:p:1-17 is not listed on IDEAS
    9. Haupt, Harry & Meier, Verena, 2016. "Dealing with heterogeneity, nonlinearity and club misclassification in growth convergence: A nonparametric two-step approach," Center for Mathematical Economics Working Papers 455, Center for Mathematical Economics, Bielefeld University.
    10. Cristina Brasili & Luciano Gutierrez, 2004. "Regional convergence across European Union," Development and Comp Systems 0402002, EconWPA.
    11. Julia Korosteleva & Colin Lawson, 2010. "The Belarusian case of transition: whither financial repression?," Post-Communist Economies, Taylor & Francis Journals, vol. 22(1), pages 33-53.
    12. Christophe Hurlin & Valérie Mignon, 2005. "Une synthèse des tests de racine unitaire sur données de panel," Economie & Prévision, La Documentation Française, pages 253-294.
    13. Roberto Duncan & J. Rodrigo Fuentes, 2005. "Convergencia Regional en Chile: Nuevos Tests, Viejos Resultados," Working Papers Central Bank of Chile 313, Central Bank of Chile.
    14. Rosa Capolupo, 2005. "THE NEW GROWTH THEORIES AND THEIR EMPIRICS, Discussion Paper in Economics, University of Glasgow, N. 2005-04 (http://www.gla.ac.uk/Acad/Economics," GE, Growth, Math methods 0506003, EconWPA.
    15. Cohen-Cole, Ethan B. & Durlauf, Steven N. & Rondina, Giacomo, 2012. "Nonlinearities in growth: From evidence to policy," Journal of Macroeconomics, Elsevier, pages 42-58.
    16. Tong, Jian, 2006. "The long wave of conditional convergence," Discussion Paper Series In Economics And Econometrics 0614, Economics Division, School of Social Sciences, University of Southampton.
    17. Peter C. B. Phillips & Donggyu Sul, 2009. "Economic transition and growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1153-1185.
    18. Nicholas Apergis & Puja Padhi, 2013. "Health expenses and economic growth: convergence dynamics across the Indian States," International Journal of Health Economics and Management, Springer, vol. 13(3), pages 261-277, December.

    More about this item

    Keywords

    Convergence Parameter; Conditional Convergence; Economic Growth; Growth Convergence; Heterogeneity; Neoclassical Economics; Transition Measures;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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