Economic Growth and Change
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Economic Growth and Change

National and Regional Patterns of Convergence and Divergence

Edited by John Adams and Francesco Pigliaru

The pursuit of economic growth is at the top of every nation’s policy agenda at the end of the 20th century. This authoritative and comprehensive book goes beyond the narrowly-based convergence model of economic growth by considering global, national and regional patterns of growth from a comparative perspective.
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Chapter 4: Openness, capital mobility and global convergence

Hui Pan


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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