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Revisiting the Solow growth model: new empirical evidence on the convergence debate

Sedat Alataş (Department of Economics, Aydin Adnan Menderes University, Aydin, Turkey)

Journal of Economic and Administrative Sciences

ISSN: 1026-4116

Article publication date: 7 September 2021

Issue publication date: 20 November 2023

529

Abstract

Purpose

This paper investigates income convergence using different convergence concepts and methodologies for 72 countries over the period between 1960 and 2010.

Design/methodology/approach

This study applies beta (β), sigma (s), stochastic and club convergence approaches. For β-convergence analysis, it derives the cross-country growth regressions of the Solow growth model under the basic and augmented Cobb–Douglass (CD) production functions and estimates them using cross-section and panel data estimators. While it employs both the widely used coefficient of variation and recently developed weak s-convergence approaches for s-convergence, it applies three different unit root tests for stochastic convergence. To test club convergence, it estimates the log-t regression.

Findings

The results reveal that (1) there exists conditional β-convergence, meaning that poorer countries grow faster than richer countries; (2) income per worker is not (weakly) s-converging, and cross-sectional variation does not tend to fall over the years; (3) stochastic convergence is not found and (4) countries in the sample do not converge to the unique equilibrium, and there exist five distinctive convergence clubs.

Research limitations/implications

The results clearly show that heavily relying on one of the convergence techniques might lead researchers to obtain misleading results regarding the existence of convergence. Therefore, to draw reliable inferences, the results should be checked using different convergence concepts and methodologies.

Originality/value

Contrary to the previous literature, which is generally restricted to testing the existence of absolute and conditional β-convergence between countries, to the best of the author’s knowledge, this is the first study to consider and compare all originally and recently developed fundamental concepts of convergence altogether. Besides, it uses the Penn World Table (PWT) 9.1 and extends the period to 2010. From this point of view, this study is believed to provide the most up-to-date empirical evidence.

Keywords

Acknowledgements

The author would like to thank Hakan Yetkiner and Necmiye Cömertler for their valuable comments and suggestions. The author also wishes to thank Tolga Omay for sharing the OHS (2018) unit root test codes. All remaining errors are the author’s own.

In the interest of transparency, data sharing and reproducibility, the author(s) of this article have made the data underlying their research openly available. It can be accessed by following the link: http://dx.doi.org/10.17632/8nyxy9wdvg.1.

Conflict of Interest: The author declares that they have no conflict of interest.

Citation

Alataş, S. (2023), "Revisiting the Solow growth model: new empirical evidence on the convergence debate", Journal of Economic and Administrative Sciences, Vol. 39 No. 4, pp. 801-817. https://doi.org/10.1108/JEAS-02-2021-0035

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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