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

Carmelo Parello

MPRA Paper from University Library of Munich, Germany

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.

Keywords: 'unconditional' convergence; two-country AK model; cross-country knowledge transmission; development policies (search for similar items in EconPapers)
JEL-codes: O12 O33 O41 (search for similar items in EconPapers)
Date: 2022-10-19
New Economics Papers: this item is included in nep-gro
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