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An Empirical Analysis of Convergence Hypothesis

Author

Listed:
  • Eatzaz Ahmad

    (Department of Economics, Quaid-i-Azam University, Islamabad.)

  • Amber Naz

    (Department of Economics, Quaid-i-Azam University, Islamabad.)

Abstract
A useful contribution of wide ranging debate in the growth literature is that it has put forward a number of testable hypotheses. One of such hypotheses is known as the convergence hypothesis whereby it is postulated that in the long run developing countries would catch-up with the developed countries in terms of per capita income. Although the convergence hypothesis has gained researchers’ interest in recent times, the basic proposition was laid down in the neo-classical growth model of Solow (1956) and Swan (1956). Traditionally Solow-Swan model has been regarded as a theoretically consistent answer to Harrods’s (1939) twin problems of discrepancy between the warranted and natural rates of growth and instability in the growth process. Although Solow- Swan model is designed to study growth process within a single country, the concept of conditional convergence is far from being alien to the model; it in fact forms the core of argument in the attack on Harrod-Domar model [Harrod (1939) and Domar (1946)]. The model predicts that under perfect competition and in the absence of market distortions, an economy converges to equilibrium capital-labour ratio to yield steady state growth rate that is equal to the natural growth rate and is dynamically stable.

Suggested Citation

  • Eatzaz Ahmad & Amber Naz, 2000. "An Empirical Analysis of Convergence Hypothesis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 729-740.
  • Handle: RePEc:pid:journl:v:39:y:2000:i:4:p:729-740
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    File URL: http://www.pide.org.pk/pdf/PDR/2000/Volume4/729-740.pdf
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 495-525.
    3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    4. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    5. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

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    2. Farooq Rasheed & Javed A. Ansari, 2004. "A Search for an Optimum Currency Area Partners for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 793-811.
    3. Muhammad Irfan, 2010. "A Review of the Labour Market Research at PIDE 1957-2009," PIDE Books, Pakistan Institute of Development Economics, number 2010:1 edited by Rashid Amjad & Aurangzeb A. Hashmi.
    4. Muhammad Safdar & Ahmad Nawaz, 2020. "Testing The Convergence Hypothesis In Solow Growth Model: A Statistical Evidence From Saarc Economies," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 9(2), pages 60-73, June.
    5. Aweng Peter Majok Garang & Hatice Erkekoglu, 2021. "Convergence Triggers in Africa: Evidence from Convergence Clubs and Panel Models," South African Journal of Economics, Economic Society of South Africa, vol. 89(2), pages 218-245, June.
    6. Haider, Adnan & Hameed, Shahzad & Wajid, Abdul, 2010. "Income Convergence Hypothesis: A Regional Comparison of selected East and South Asian Economies," MPRA Paper 23739, University Library of Munich, Germany.

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