DP2465 Convergence Across Countries And Regions: Theory And Empirics

Author(s): Angel de la Fuente
Publication Date: May 2000
Keyword(s): Convergence, Growth
JEL(s): O40
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2465

This paper surveys the recent literature on convergence across countries and regions. We discuss the main convergence and divergence mechanisms identified in the literature and develop a simple model that illustrates their implications for income dynamics. We then review the existing empirical evidence and discuss its theoretical implications. Early optimism concerning the ability of a human capital-augmented neoclassical model to explain productivity differences across economies has been questioned on the basis of more recent contributions that make use of panel data techniques and obtain theoretically implausible results. Some recent research in this area tries to reconcile these findings with sensible theoretical models by exploring the role of alternative convergence mechanisms and the possible shortcomings of panel data techniques for convergence analysis.