Conditional Convergence Revisited: Taking Solow Very Seriously

Kieran McQuinn and Karl Whelan ()

No 7/RT/06, Research Technical Papers from Central Bank of Ireland

Abstract: Output per worker can be expressed as a function of technological efficiency and of the capital-output ratio. Because technology is exogenous in the Solow model, all of the endogenous convergence dynamics take place through the adjustment of the capital-output ratio. This paper uses the empirical behaviour of the capital-output ratio to estimate the speed of conditional convergence of economies towards their steady-state paths. We find that the conditional convergence speed is about seven percent per year. This is somewhat faster than predicted by the Solow model and is significantly higher than reported in most previous studies based on output per worker regressions. We show that, once there are stochastic shocks to technology, standard panel econometric techniques produce downward-biased estimates of convergence speeds, while our approach does not.

JEL-codes: O41 O47 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2006-07
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Conditional convergence revisited: taking Solow very seriously (2006)
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