Conditional convergence revisited : taking Solow very seriously

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Title: Conditional convergence revisited : taking Solow very seriously
Authors: Whelan, Karl
McQuinn, Kieran
Permanent link: http://hdl.handle.net/10197/242
Date: Jul-2006
Abstract: Output per worker can be expressed as a function of technological efficiency and of the capital-output ratio. Because technology is exogenous in the Solow model, all of the endogenous convergence dynamics take place through the adjustment of the capital-output ratio. This paper uses the empirical behaviour of the capital-output ratio to estimate the speed of conditional convergence of economies towards their steady-state paths. We find that the conditional convergence speed is about seven percent per year. This is somewhat faster than predicted by the Solow model and is significantly higher than reported in most previous studies based on output per worker regressions. We show that, once there are stochastic shocks to technology, standard panel econometric techniques produce downward-biased estimates of convergence speeds, while our approach does not.
Type of material: Technical Report
Publisher: Central Bank of Ireland
Series/Report no.: Central Bank of Ireland Research Technical Paper; 7/RT/06
Copyright (published version): 2006 Copyright Central Bank of Ireland
Subject LCSH: Solow growth model
Convergence (Economics)
Capital productivity
Other versions: http://www.centralbank.ie/data/TechPaperFiles/7RT06.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Research Collection

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