Working Paper: CEPR ID: DP9687
Authors: Michele Battisti; Gianfranco Di Vaio; Joseph Zeira
Abstract: This paper extends the standard growth regression model by adding an assumption that a country follows the global technology frontier either fully or partially. This additional assumption changes significantly the growth regression model and its results in three main ways. First, it shows that although a country converges to its long-run growth path, this path can diverge from the countries at the global frontier. We measure the degree of divergence for each country and find that most indeed diverge from the frontier. Second, we estimate growth dynamics without controlling for additional variables. Third, our new method enables us to disentangle the effects of the explanatory variables on the long-run rate of growth from the short-run effects.
Keywords: convergence; divergence; economic growth; global frontier; growth regressions
JEL Codes: O40; O47; O57
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| extended growth regression model (C29) | understanding of growth dynamics (O41) |
| findings (Y40) | differences in growth dynamics across countries (O57) |
| technology adoption (d) (O33) | long-run growth path (O41) |
| convergence parameter (b) (O47) | speed of self-convergence (C69) |
| convergence parameter (b) (O47) | self-convergence (O47) |
| panel cointegration and regression of differences (C22) | consistent results (C52) |
| d < 1 (C29) | global divergence (F29) |