The Elusive Empirical Shadow of Growth Convergence
Two groups of applied econometricians have ﬁgured prominently in empirical studies of growth convergence. In terms of a popular caricature, one group believes it has found a black hat of convergence (evidence for growth convergence) in the dark room of economic growth, even though the hat may not exist (the task may be futile). A second group believes it has found a black coat of divergence (evidence against growth convergence) even though this object also may not exist (empirical reality, including the nature of growth divergence, is ever more complex than the models used to characterize it). The present paper seeks to light a candle to see whether there is a hat, a coat or another object of identiﬁable clothing in the room of regional and multi-country economic growth. After our examination, we ﬁnd that the candle power of applied econometrics is too low to clearly distinguish a black hat in the huge dark room of economic growth. However, in our theory model, we ﬁnd an important new role for heterogeneity over time and across economies in the transitional dynamics of economic growth; and, in our empirical work, these transitional dynamics reveal an elusive shadow of the conditional convergence hat in both US regional and inter-country OECD growth patterns.
Phillips, Peter C.B. and Sul, Donggyu, "The Elusive Empirical Shadow of Growth Convergence" (2003). Cowles Foundation Discussion Papers. 1665.