Theories of growth convergence

Thanks to the underlying homogeneity of its land and people, England was able to achieve a unified legal and fiscal system since the Middle Ages that enabled it to substantially increase the taxes it raised after It is possible to observe different "clubs" or groups of countries with similar growth trajectories.

How often should convergence be expected? Over time, such disparities might well serve to widen differences both across and within nations, thus leading toward divergence rather than convergence. Common to these attempts to revive convergence theory is the exhortation to develop more and better empirical research on specific institutional spheres and social processes.

Convergence theorists are surely on solid ground when they assert that programs to protect against the seven or eight basic risks of industrial life are primarily responses to economic development….

New Economic Growth Theories Endogenous growth Endogenous growth models, developed by Paul Romer and Robert Lucas placed greater emphasis on the concept of human capital. In contrast, economic growth is concerned with the long-run trend in production due to structural causes such as technological growth and factor accumulation.

Importantly, Kerr et al. The rate of growth of GDP per capita is calculated from data on GDP and people for the initial and final periods included in the analysis of the analyst. But a more fundamental problem, which evolutionists have not reckoned with, is that convergence violates the evolutionary pattern.

Economies that cease to transform themselves are destined to fall off the path of economic growth. September Further information: Emphasis is placed on free-markets, reducing regulation and subsidies.

Keynesian demand-side — Keynes argued that aggregate demand could play a role in influencing economic growth in the short and medium-term. Much unregistered property is held in informal form through various property associations and other arrangements.

In contrast, his examination of the political economy channel found no support for the political economy mechanism. The large research literature related on this question, reviewed by Formhas produced mixed evidence with respect to convergence.

Thus, this is in contrast to the theory of conditional convergence, and would suggest that foreign aid should also include income transfers and that initial income does in fact matter for economic growth. The Malthus Predictions It is argued that economic growth may have limitations caused by lack of raw materials, climate change and overcrowding.

If an economy experiences a recession for a long time, the average long-run growth rate will be lower. Image via Wikipedia The Solow model predicts that growth rates tend to diminish over time as the economy approaches a steady state level of output per worker.

Stephen Parente contends that new growth theory has proved to be no more successful than exogenous growth theory in explaining the income divergence between the developing and developed worlds despite usually being more complex.

Women with fewer children and better access to market employment tend to join the labor force in higher percentages. So regardless of where you position yourself in this debate, please understand that attempts to explain convergence under evolutionary theory, while important in normal science, do nothing to remedy the underlying theoretical problem, which is devastating.

The critique of convergence theory in the study of modernization recalls critiques of earlier theories of societal evolution advanced under the rubric of social Darwinism in the nineteenth century and structural functionalism in the mid-twentieth century. Freedmanfor example, suggests that cultural factors mediate the effects of social structural factors central to transition theory.

Explaining Theories of Economic Growth

But what drives this growth? The theory is based on the idea that the growth rate will slow as an economy approaches the steady state level of capital per worker. Regardless of adaptation versus constraint explanations, and any other mechanisms evolutionists can or will imagine, the basic fact remains: This leaves evolutionists struggling to figure out how the proverbial lightning could strike twice, as illustrated in a recent symposium: Many of these intermediate level institutions relied on informal private-order arrangements that combined with public-order institutions associated with states, to lay the foundations of modern rule of law states.

Therefore, countries with land that is suitable for sugar converge with other countries that also have land that is suitable for growing sugar. Absolute convergence predicts that poor countries will grow more quickly regardless of their eventual steady state level of output.A list and explanation of different theories of economic growth.

Including mercantilism, classical models, endogenous, Keynesian demand-side - limit to growth theories.

Endogenous growth theory

Evaluation of. Endogenous growth theory holds that investment in human capital, innovation, and knowledge are significant contributors to economic growth. The theory also focuses on positive externalities and spillover effects of a knowledge-based economy which will lead to economic development.

The endogenous growth theory primarily holds that the long. Evaluate the speed of economic convergence between high-income countries and the rest of the world Some low-income and middle-income economies around the world have shown a pattern of convergence, in which their economies grow faster than those of high-income countries.

Welcome to our series on economic theories that are changing the way we think. Today, James Morley explains how the very concept of what economic growth means is being re-shaped by endogenous.

Convergence theory states that as nations transition from the beginning stages of industrialization to highly industrialized nations, the same societal patterns will emerge, eventually creating a global culture.

Biology is replete with instances of convergence — repeated designs in distant species. Marsupials and placentals, for instance, are mammals with different reproductive designs (placentals have significant growth in the embryonic stage attached to the nutrient-rich placenta whereas marsupials.

Theories of growth convergence
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