Myths about Beta-Convergence

Gluschenko, Konstantin (2012): Myths about Beta-Convergence. Published in: Журнал Новой экономической ассоциации No. 4 (2012): pp. 26-44.

Abstract

A popular methodology of studying spatial income inequality is analysis of beta-convergence (i.e. an inverse relationship between current income per capita and its initial level). Its widespread use is based on a belief that the economic growth theory predicts income convergence among economies (countries or regions within a country), and that beta-convergence suggests decreasing income inequality. This article demonstrates that these are nothing but myths; hence, analyzing of beta-convergence cannot serve as an adequate methodology for studying and predicting the evolution of spatial income inequality.

• Item Type: MPRA Paper
• Language: English
• Keywords: spatial income inequality, convergence, economic growth
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

References

Azariadis C., Drazen A. (1990). Threshold Externalities in Economic Development. Quarterly Journal of Economics, 105 (2), 501–526.

Barro R.J., Sala-i-Martin X. (1991) Convergence across States and Regions. Brookings Papers on Economic Activity, No. 1, 107–182.

Barro R.J., Sala-i-Martin X. (1992). Convergence. Journal of Political Economy, 100 (2), 223–251.

Barro R.J., Sala-i-Martin X. (2004). Economic Growth. 2nd ed. Cambridge, MA, London: MIT Press.

Baumol W.J. Productivity Growth, Convergence, and Welfare: What the Long-Data Show. American Economic Review, 76 (5), 1072–1085.

Durlauf S. N., Quah D. (1999). The New Empirics of Economic Growth. In: Taylor J., Woodford M. (eds.), Handbook of Macroeconomics, Oxford: Elsevier, Vol. 1A, pp. 235–308.

Friedman M. (1992). Do Old Fallacies Ever Die? Journal of Economic Literature, Vol. 30 (4), 2129–2132.

Furceri D. (2005).  and -Convergence: A Mathematical Relation of Causality. Economics Letters, Vol. 89 (2), 212–215.

Galor O. (1996). Convergence? Inferences from Theoretical Models. Economic Journal, Vol. 106 (437), 1056–1069.

Galton F. (1886). Regression towards mediocrity in hereditary stature. Journal of the Anthropological Institute of Great Britain and Ireland, 15, 246–263. (URL: www.galton.org/essays/1880-1889/galton-1886-jaigi-regression-stature.pdf)

Heston A., Summers R., Aten B. (2002). Penn World Table Version 6.1. – Center for International Comparisons at the University of Pennsylvania (CICUP). URL: pwt.econ.upenn.edu/php_site/pwt61_form.php.

Jenkins S.P., van Kerm, P. (2009). The Measurement of Economic Inequality. In Salverda W., Nolan B., Smeeding T.M. (eds.), Oxford Handbook of Economic Inequality, Oxford: Oxford University Press, pp. 40–67.

Magrini S. (2004). Regional (Di)Convergence. In Henderson V., Thisse J.-F. (eds.), Handbook of Regional and Urban Economics, Oxford: Elsevier, Vol. 4, pp. 2741–2796.

Melnikov R.M. (2005). Analysis of the Dynamics of Inter-Regional Economic Inequality: Foreign Approaches and the Russian Practice. Region: Ekonomika i Sotsiologia [Region: Economics and Sociology], No. 4, 3–18. [In Russian.]

Mikheeva N. (1999). Analysis of Interregional Inequality in Russia. Studies on Russian Economic Development, 10 (5), 514–521.

Romer P. M. (1986). Increasing Returns and Long-Run Growth. Journal of Political Economy, Vol. 94 (5), 1002–1037.

Rosstat (2011). Regions of Russia. Socio-Economic Indicators, Moscow: Rosstat. [In Russian.]

Quah D. (1993) Galton’s Fallacy and Tests of the Convergence Hypothesis. Scandinavian Journal of Economics, Vol. 95 (4), 427–443.

Wodon Q., Yitzhaki S. (2006). Convergence Forward and Backward? Economics Letters, Vol. 92 (1), 47–51.

Zaitseva Yu.S. (2012). Gross Regional Product: What and How We Measure. ECO, No. 4, 86–103. [In Russian.]

Zubarevich N.V. (2012). “Cunning Figures” on the Map of Russia. ECO, No. 4, 74–85. [In Russian.]