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9 - Growth and convergence in OECD countries: a closer look

Published online by Cambridge University Press:  23 December 2009

Bart van Ark
Affiliation:
Rijksuniversiteit Groningen, The Netherlands
Nicholas Crafts
Affiliation:
London School of Economics and Political Science
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Summary

Introduction

Economic integration among European countries is expected to bring about faster average growth. Less advanced countries hope to narrow the gap with the richer ones in terms of per capita income. However, whether or not this distributional effect will work is still an open question. From a theoretical viewpoint, growth theory is the appropriate framework to deal with these issues. In the long run, two basic features determine a country's economic achievements. One is the preferences of households, firms and governments for current consumption as opposed to future consumption. The other is the technological capability (in a broad sense) of the society to use the resources not devoted to current consumption.

In this chapter we carry out an empirical analysis of convergence patterns among the OECD countries, which satisfy reasonably well the traditional hypothesis of neoclassical growth models: they present a sustained growth of income per capita from the 1950s onwards, welldeveloped markets for production factors and relatively constant saving rates. We check the robustness of the main parameters in the constant returns to the scale Solow model under alternative specifications and estimation procedures. We also analyse the stability of the model (in particular the convergence rate) over time and across country groups.

Convergence regressions are carried out in the way popularized by Barro and Sala-i-Martin (1991) and Mankiw et al (1992), MRW hereafter, among others. Our interest is not merely to assess whether or not convergence has taken place, but also to see whether the long-run evolution of these economies can be explained in the theoretical framework of the Solow (1956) model.

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Publisher: Cambridge University Press
Print publication year: 1997

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