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Converging to Converge? A Comment

Author

Listed:
  • Daron Acemoglu
  • Carlos A. Molina
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 They provide evidence that the lack of convergence that applied early in the sample has now been replaced by modest convergence.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.

Suggested Citation

  • Daron Acemoglu & Carlos A. Molina, 2021. "Converging to Converge? A Comment," NBER Working Papers 28992, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28992
    Note: EEE POL
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    File URL: http://www.nber.org/papers/w28992.pdf
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    Citations

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    Cited by:

    1. André, Christophe & Christou, Christina & Gupta, Rangan, 2024. "Revisiting international house price convergence using house price level data," Economic Systems, Elsevier, vol. 48(2).
    2. Li, Junqing & Yang, Zhiyuan & Liu, Kaifeng, 2024. "Research on contracting institutions and convergence," China Economic Review, Elsevier, vol. 84(C).
    3. Jie Tang & Wenyue Cui, 2024. "Does the Internet trigger an innovative spatial revolution: evidence from China," Information Technology and Management, Springer, vol. 25(4), pages 305-318, December.
    4. Eftimoski, Dimitar, 2022. "On the inconclusive effect of human capital on growth: A new look at extended specifications," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 708-727.
    5. Kadigi, Reuben M.J. & Robinson, Elizabeth & Szabo, Sylvia & Kangile, Joseph & Mgeni, Charles P. & De Maria, Marcello & Tsusaka, Takuji & Nhau, Brighton, 2022. "Revisiting the Solow-Swan model of income convergence in the context of coffee producing and re-exporting countries in the world," LSE Research Online Documents on Economics 115636, London School of Economics and Political Science, LSE Library.
    6. Petrović, Pavle & Gligorić Matić, Mirjana, 2023. "Manufacturing productivity in the EU: Why have Central and Eastern European countries converged and Southern EU countries have not?," Structural Change and Economic Dynamics, Elsevier, vol. 65(C), pages 166-183.
    7. Ahlerup, Pelle & Olsson, Ola, 2023. "Sustainable Economic Growth: A Critical Assessment of SDG 8.1," Working Papers in Economics 834, University of Gothenburg, Department of Economics.
    8. Amparo Castello-Climent & Rafael Domenech, 2024. "Convergence in human capital and income," Economics Bulletin, AccessEcon, vol. 44(2), pages 652-661.
    9. Bryan Hardy & Can Sever, 2023. "Innovation convergence," BIS Working Papers 1108, Bank for International Settlements.

    More about this item

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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