Converging to Converge? A Comment

Daron Acemoglu and Carlos A. Molina

No 28992, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Kremer, Willis, and You (2021) revisit cross-country convergence patterns over the last six decades. They provide evidence that the lack of convergence that applied early in the sample has now been replaced by modest convergence. They also argue this relationship is driven by convergence in various determinants of economic growth across countries and a flattening of the relationship between these determinants and growth. Although the patterns documented by the authors are intriguing, our reanalysis finds that these results are driven by the lack of country fixed effects controlling for unobserved determinants of GDP per capita across countries. We show theoretically and empirically that failure to include country fixed effects will create a bias in convergence coeffcients towards zero and this bias can be time-varying, even when the underlying country-level parameters are stable. These results are relevant not just for the current paper, but for the convergence literature more generally. Our reanalysis finds no evidence of major changes in patterns of convergence and, more importantly, no flattening of the relationship between institutional variables and economic growth. Focusing on democracy, we show that this variable's impact continues to be precisely estimated and if anything a little larger than at the beginning of the sample.

JEL-codes: O47 P16 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-gro
Note: EEE POL
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.nber.org/papers/w28992.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:28992

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28992

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().