Convergence analysis: a new approach

Gáspár, Attila (2012): Convergence analysis: a new approach. Published in: Crisis Aftermath: Economic policy changes in the EU and its Member States, Conference Proceedings, Szeged, University of Szeged , Vol. ISBN 9, (2012): pp. 382-390.

Abstract

Economic growth and convergence is one of the most discussed fields in economics, as the long-run growth basically determines the welfare of countries. On the basis of neoclassical growth models, countries with lower GDP per capita will tend to grow faster than richer ones. However, convergence is not always confirmed. This means that economies are converging but the steady-state level is not always common, so countries may converge to different / own level of steady-states.

At the same time, the term ‘convergence’ can be interpreted by different ways. Therefore, multiple methods have to be applied to measure processes of convergence or divergence in a comprehensive way.

In this paper an indicator, called omega is presented in order to calculate convergence/divergence by a new approach. Omega is an adjusted weighted standard deviation of economic development (catching-up), which can be calculated on a single or multivariate basis.

The paper is organized as following. Section 1 briefly describes the definition and methodology of convergence. Section 2 outlines the model. In section 3 different types of convergence indicators are analysed and compared. Section 4 concludes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Convergence; growth econometrics; growth theories
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General

References

Barro, R. J. – Sala-I-Martin, X. (2004): Economic growth. MIT Press, Cambridge, London.

Ferkelt B. – Gáspár A. (2008): Konvergencia-vizsgálatok az Európai Unióban (Convergence studies in the European Union). EU Workings papers 11, 1, pp. 35-44. Budapesti Gazdasági Főiskola. Budapest.

Gáspár A. (2010a): Economic growth and convergence in the world economies: an econometric analysis. Proceedings of the Challenges for Analysis of the Economy, the Businesses, and Social Progress, International Scientific Conference, pp. 97-110. Unidocument Kft., Szeged.

Gáspár A. (2010b): Klub-konvergencia mérése a világ országaiban (Measurement of club-convergence in the countries of the world). A Magyar Közgazdaságtudományi Egyesület konferenciája (Conference of the Hungarian Society of Economics). 20 December 2010. http://media.coauthors.net/konferencia/conferences/3/MKE.pdf

Galor, O. (1996): Convergence? Inferences from theoretical models. Economic journal, 106, 437, pp. 1056-1069.

Durlauf, S.N. – Johnson, P. – Temple, J.R.W. (2004): Growth Econometrics. Vassar College Department of Economics Working Paper Series, Vassar College, New York.

Penn World Table v6.3 (2010): http://pwt.econ.upenn.edu/php_site/pwt63/pwt63_form.php

Sala-I-Martin, X. (1996a): Regional cohesion: Evidence and theories of regional growth and convergence. European Economic Review, 40, 6, pp. 1325-1352.

Sala-I-Martin, X. (1996b): The classical approach to convergence analysis. The Economic Journal, 106, 437, pp. 1019-1036.

Solow, R.M. (1956): A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 1, pp. 65-94.

Sorensen, P.B. – Whitta-Jacobsen, H.J. (2005): Introducing Advanced Macroeconomics: Growth and Business Cycles. University of Copenhagen, Copenhagen.