DP1350 Convergence? Inferences from Theoretical Models
|Publication Date:||February 1996|
|Keyword(s):||Club Convergence, Conditional Convergence, Growth, Income Distribution, Multiple Steady-state, Overlapping-generations|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1350|
This essay suggests that the convergence controversy may reflect, in part, differences in perception regarding the viable set of competing testable hypotheses generated by existing growth theories. It argues that in contrast to the prevailing wisdom, the traditional neo-classical growth paradigm generates the club convergence hypothesis as well as the conditional convergence hypothesis. Furthermore, the inclusion of empirically significant variables such as human capital, income distribution, and fertility in conventional growth models, along with capital market imperfections, externalities, and non-convexities, strengthens the viability of club convergence as a competing hypothesis with conditional convergence.