On the Mechanics of Economic Convergence

Thomas Steger

German Economic Review, 2006, vol. 7, issue 3, 317-337

Abstract: Abstract. The speed at which an economy converges to its steady state is investigated by using a general non‐scale R&D‐based growth model. To accomplish this task, an analytical decomposition formula for the instantaneous rate of convergence is developed. By applying this decomposition to the model under study, the driving forces behind the convergence process are identified. Two convergence mechanisms are distinguished: the accumulation–decumulation mechanism and the resource–reallocation mechanism. The relative importance of the different convergence mechanisms is assessed using numerical techniques. Moreover, it is shown that the specific shock being considered might be crucial for the instantaneous rate of convergence.

Date: 2006
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https://doi.org/10.1111/j.1468-0475.2006.00158.x

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Journal Article: On the Mechanics of Economic Convergence (2006)
Working Paper: On the Mechanics of Economic Convergence (2003)
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