DP9687 Global Divergence in Growth Regressions

Author(s): Michele Battisti, Gianfranco Di Vaio, Joseph Zeira
Publication Date: October 2013
Keyword(s): Convergence, Divergence, Economic Growth, Global Frontier, Growth Regressions
JEL(s): O40, O47, O57
Programme Areas: Development Economics, International Macroeconomics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9687

This paper extends the standard growth regression model by adding an assumption that a country follows the global technology frontier either fully or partially. This additional assumption changes significantly the growth regression model and its results in three main ways. First, it shows that although a country converges to its long-run growth path, this path can diverge from the countries at the global frontier. We measure the degree of divergence for each country and find that most indeed diverge from the frontier. Second, we estimate growth dynamics without controlling for additional variables. Third, our new method enables us to disentangle the effects of the explanatory variables on the long-run rate of growth from the short-run effects.