Working Paper: CEPR ID: DP1163
Authors: Daniel Cohen
Abstract: This paper offers new tests of the `convergence hypothesis'. It first analyses the pattern of growth of measured inputs (human and physical capital conventionally measured by an inventory method) and shows that these tests sustain the hypothesis. On the other hand, when the pattern of growth of revealed inputs (physical capital and Solow residual) is analysed, one is led to reject the convergence theory. In order to understand what lies at the heart of this discrepancy, the paper shows that the poor countries failed to catch up with the rich countries not so much because they failed to raise their school enrolments (or the UN-conditional convergence of the stock of measured inputs would not hold), but because the law of motion of human capital embodies a `stock of knowledge' which they failed to raise adequately.
Keywords: growth; convergence; human capital; physical capital
JEL Codes: O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| human capital (J24) | economic growth (O49) |
| physical capital (E22) | economic growth (O49) |
| measured inputs (C67) | convergence hypothesis (F62) |
| revealed inputs (C67) | rejection of convergence theory (F62) |
| school enrollments (I21) | stock of knowledge in human capital (J24) |
| initial stock of human capital (J24) | dynamics of human capital accumulation (J24) |