Economic convergence theory pdf

Economic growth, and therefore economic convergence, requires reasonably. Economic convergence meaning in the cambridge english. Economic growth and convergence across the united states. Analyze various arguments for and against economic convergence evaluate the speed of economic convergence between highincome countries and the rest of the world some lowincome and middleincome economies around the world have shown a pattern of convergence, in which their economies grow faster than those of highincome countries. In the first place it investigates the specifications of economic indicators used in. Economic convergence definition in the cambridge english. By unconditional convergence we mean that ldcs will ultimately catch. If this is the case, then the relationship between initial income and the growth rate for country i may be written in logarithms as. Convergence theory, based on neoclassical economic reasoning, predicts that factor incomes in all parts of an integration area will eventually converge provided that sufficiently strong adjustment mechanisms within the integration area exist. Pdf media convergence concepts katarzyna kopeckapiech. Convergence theory a modern bourgeois theory according to which the economic, political, and ideological differences between the capitalist and socialist systems are gradually diminishing, leading ultimately to a merger of the two systems. Ten years ago, developing economies were catching up with developed ones remarkably quickly. What does history, theory, empirics tell us about the underlying dynamics of convergence. A key economic issue is whether poor countries or regions tend to grow faster than rich ones.

Jenkins breaks convergence down into five categories. Economic growth analysis is the study of what factors and mechanisms determine the time path of productivity a simple index of productivity is output per unit of labor. I am grateful to arvind subramanian for helpful conversations and to. The analysis reveals that high levels of economic development and related changes in the occupational and industrial composition of the labor force result in two areas of. Some lowincome and middleincome economies around the world have shown a pattern of convergence, in which their economies grow faster than those of highincome countries. Economic convergence across german regions in light of. Using crosscountry variances to evaluate growth theories journal. The theory is sound, but its very important to focus on the caveat about all other things being equal. As early as 1848 in the communist manifesto karl marx contended that human civilization developed in stages from pastoral to communist harmony, driven by an ineluctable historical dialectic.

Free trade, growth, and convergence dan bendavid tel aviv university, tel aviv, israel 69978, national bureau of. Media theorist henry jenkins argues that convergence isnt an end result as is the hypothetical black box, but instead a process that changes how media is both consumed and produced. October 2001 abstract the paper argues that an economys industrytechnology structure is endogenously determined by the economys endowment structure. I am grateful to arvind subramanian for helpful conversations and to unido for making their indstat4 data base available.

Economic theory many arguments that regional integration brings economic convergence come from economic theory. The convergence theory asserts that industrial nations are becoming increasingly alike due to their economic and technological development. The effect of financial development on convergence. Range of critiques shortcomings found in convergence theory, generally, and that version advanced by barro and salaimartin, speci. Ecb economic bulletin, issue 5 2015 article 30 article real convergence in the euro area. Convergence theory presumes that as nations move from the early stages of industrialization toward becoming fully industrialized, they begin to resemble other industrialized societies in terms of societal norms and technology. Economic theory and the convergence versus divergence. Convergence, as used in the theory of economic growth, refers to the tendency of less developed economies to grow more quickly than more mature economies. Economic fluctuations and growth a key economic issue is whether poor countries or regions tend to grow faster than rich ones. Kar and others 2010 apply stochastic kernel estimation to study convergence of inequality between indian states over time since economic liberalization in the early 1990s. I am assuming you are talking about convergence or the catchup effect in economics. The future of economic convergence dani rodrik harvard university august 2011 this is a paper prepared for the 2011 jackson hole symposium of the federal reserve bank of kansas city, august 2527, 2011. Some theorists have since expounded upon kerrs original premise. Chinas economic growth and convergence during the past half century, the chinese economy showed outstanding performance, with the average annual per capita gdp growth rate surpassing 6.

This is not a bad line of reasoning, but to appreciate why it is misguided, it is important to refer to a venerable tradition in economics that has convergence as its very core prediction. For instance, economic trade theory is especially relevant to european. Capitalism from his perspective was an internally contradictory phase destined to be destroyed by a proletarian revolution ushering in a. Svensson, jakob, investment, property rights, and political instability. Early calculations showed that, controlling for population growth and the rate of investment in capital goods, per capita income in a sample of 121 countries did appear to. But the huge wave of publications, conferences and discussions about media convergence began just after the publication of henry jenkins book convergence. Some studies have tested for the convergence of inequality between states within a country. Convergence theory became popular in the 1960s when it was formulated by the university of california, berkeley professor of economics clark kerr. Economic convergence the headwinds return briefing the. Globalization, convergence, and history the journal of.

Convergence theory article about convergence theory by the. We use the neoclassical growth model as a framework to study convergence across the 48 contiguous u. Pdf economic convergence in the european union researchgate. Pdf starting with the treaty of rome 1957, the european union adopted common.

Unconditional convergence and the missing middle income trap abstract this paper suggests a reinterpretation of global growthencompassing notions of unconditional convergence and the middle income trapin the past 50 years through the lens of growth theory. The idea of convergence in economics also sometimes known as the catchup effect is the hypothesis that poorer economies per capita incomes will tend to grow at faster rates than richer economies. Average per capita gdp growth rate was initially low and then. There are three types of convergence unconditional convergence, conditional convergence and no convergence. Let us make an indepth study of the convergence hypothesis. Those who supported these theories thought this phenomenon would be due in part. In the theory, countries above some threshold level of. Economic convergence in the eu ropean union 209 this is evidence that the ec onomies of the eu north and eu9 subgroups of countries, which also conv erged, are structurally simila r. Two contrasting theories have been developed in relation to this. 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. Sep 30, 2019 convergence theory presumes that as nations move from the early stages of industrialization toward becoming fully industrialized, they begin to resemble other industrialized societies in terms of societal norms and technology. It states that two countries that are the same in all their parameters savings rates, population growth rates, rates of technical progress, and so on. Economists and other social scientists jealously guard their right to define concepts as they see fit.

The convergence theory arose in the 1950s and 1960s under the influence of the progressing socialization of capitalist production caused by the scientific and technological revolution, the increasing economic role of the bourgeois state, and the introduction of elements of planning in the capitalist countries. This new theory, called conditional convergence, has endured in the mainstream of economics, in large part because of the strength of the empirical evidence that supports it. Economic convergence the headwinds return briefing. The concept of convergence between countries in terms of gdp per capita is currently a common question of economic thinking, this convergence hypothesis is based on the neoclassical growth models. Convergence theory definition, discussion and examples. Economic convergence occurs when a company controls several products or services within the same industry. Detractors of convergence theory noted that early theorists failed to examine the possibility that advancements in technology had nothing to do with economic or social. Both convergence theory and modernization theory examined the link between economic development and societal change. This chapter discusses evidence for convergence theory, the idea that as rich countries got richer, they developed similar economic, political, and social structures and to some extent common values and beliefs. After considering predictions of closed and openeconomy neoclassical growth theories, we examine data since 1840 from the u. As i explain in this interview from my last trip to australia, countries with bad. The assumption that there is a uniquely correct or at least a uniquely appropriate definition of economic growth, openly invites a very fundamental type of criticism.

The first way of understanding real convergence exclusively by the market forces pertains to the neoclassical theory of economic growth. Convergence theory article about convergence theory by. The convergence theory holds that as national boundaries are eroded in the political, technological and business arenas, so too local differences in. We begin by considering the theoretical predictions about convergence from the standard neoclassical growth model of a closed economy. This chapter thus provides an overview of the convergence and divergence approaches of economic theory. For these models the convergence will occur when a poor country tends to catch up. Globalization, convergence, and history volume 56 issue 2 jeffrey g. Predicting the economic future through convergence.

Economic growth, convergence, and agricultural economics. Economic convergence in the european union journal of. Most interpretations of the convergence theory either state or imply that political factors are unimportant in shaping the common welfare state toward which all industrial nations are converging. Economic growth and convergence across the united states robert j. Media researchers have been interested in the problem of media convergence since the 1980s. As a result, all economies should eventually converge in terms of per capita income. Does the convergence theory in economics actually work in. The focus is on productivity levels and productivity growth. According to the hypothesis that poorer economies per capita incomes will tend to grow at faster rates than richer economies.