Working Paper: NBER ID: w3717
Authors: Andrew B. Bernard; Steven N. Durlauf
Abstract: This paper explores the convergence of real per capita output in advanced industrialized economies. We start by observing that in a stochastic environment. convergence in per capita GDP requires that permanent shocks to one econ~ be associated with permanent shocks to other economies. Convergence is a natural outcome, of models where exogenous technical change migrates across countries with similar microeconomic specifications. Conversely, in a world where some component of permanent output movements is due to technical change whereas other components are due to domestic factors. national economies may diverge over time. we formalize a general definition of convergence using the notions of unit roots and cointegration developed in the time series literature. We construct bivariate and multivariate tests of convergence across advanced industrialized economies. Our evidence indicates that one cannot reject the no convergence null. Further. the estimated time series representation of cross-country output deviations exhibits substantial persistence. These results suggest that previous empirical work on convergence has neglected some aspects of the null hypothesis.
Keywords: convergence; economic growth; output movements; stochastic processes
JEL Codes: F43; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| permanent shocks to one economy (F41) | permanent shocks to others (E71) |
| strong common elements (L61) | long-run economic fluctuations (E32) |
| differing initial incomes (D31) | similar long-run growth rates (O57) |
| country-specific factors (F29) | growth (O40) |