Conditional convergence revisited : taking Solow very seriously
|Title:||Conditional convergence revisited : taking Solow very seriously||Authors:||Whelan, Karl
|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
|Other versions:||http://www.centralbank.ie/data/TechPaperFiles/7RT06.pdf||Language:||en||Status of Item:||Not peer reviewed|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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