National and Regional Patterns of Convergence and Divergence
Edited by John Adams and Francesco Pigliaru
Chapter 4: Openness, capital mobility and global convergence
Page 102 4. Openness, capital mobility and global convergence Hui Pan 4.1 INTRODUCTION1 In recent years there has been a renewed interest in economic growth and a corresponding increase of literature on the topic. One issue that has attracted attention over the last few years is the issue of convergence (Barro and SalaiMartin, 1990, 1991, 1995; Barro, Mankiw and SalaiMartin, 1992; Sachs and Warner, 1995a). Two concepts of convergence are used in the literature: beta convergence and sigma convergence. Beta convergence refers to the phenomenon that countries with lower per capita income grow faster than countries with higher per capita income; sigma convergence means that the dispersion in per capita income across countries declines over time. The primary finding of the studies is that countries converge at a speed of about 2 per cent per year after controlling for different steady states and that the variance in per capita income across countries moves to a steady state level. When controlling the random shocks, faster beta convergence will lead to the reduction of the dispersion of per capita income across economies over time. In a recent paper, Sachs and Warner (1995a) studied the relationship between trade openness and economic convergence. After detailed examination of trade openness for 117 countries, the authors separated these countries into two groups: the open economy group and the closed economy group. Unconditional convergence was found in the open economy group while there was no sign of convergence for the countries in the...
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