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Reopening the convergence debate: a new look at cross-country growth empirics

By Francesco Caselli, Gerardo Esquivel and Fernando Lefort

Abstract

There are two sources of inconsistency in existing cross-country empirical work on growth: correlated individual effects and endogenous explanatory variables. We estimate a variety of cross-country growth regressions using a generalized method of moments estimator that eliminates both problems. In one application, we find that per capita incomes converge to their steady-state levels at a rate of approximately 10 percent per year. This result stands in sharp contrast to the current consensus, which places the convergence rate at 2 percent. We discuss the theoretical implications of this finding. In another application, we perform a test of the Solow model. Again, contrary to prior reults, we reject both the standard and the augmented version of the model

Topics: HD Industries. Land use. Labor
Publisher: Springer
Year: 1996
DOI identifier: 10.1007/BF00141044
OAI identifier: oai:eprints.lse.ac.uk:3949
Provided by: LSE Research Online
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