In Defence of the Endogenous Growth Theory: "Conditional" and "Unconditional" Convergence in Two-Country AK Models

Parello, Carmelo Pierpaolo (2022): In Defence of the Endogenous Growth Theory: "Conditional" and "Unconditional" Convergence in Two-Country AK Models.

Abstract

Recent studies on cross-country (per capita) income inequality have found evidence for 'unconditional' convergence, and have interpreted this finding as a data rejection for AK growth models. This paper shows that a two-country version of the AK model with learning-by-doing externalities, extended to include international knowledge transfer, is: (i) consistent with the finding of 'unconditional' convergence that characterizes the world economy since mid 1980s; (ii) more effective than Neoclassical growth models to predict all types of convergence/divergence patterns that the empirical growth economists have documented in almost forty years of literature.

• Item Type: MPRA Paper
• Language: English
• Keywords: 'unconditional' convergence; two-country AK model; cross-country knowledge transmission; development policies
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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