An Alternative Perspective
- New Horizons in Institutional and Evolutionary Economics series
Edited by Erik S. Reinert
Chapter 11: Convergence, Divergence and the Kuznets Curve
Ådne Cappelen The study of economic growth has again become a major area of interest for both applied and theoretical economics. This chapter relates some of these developments to the empirical study of economic growth focusing on Europe. My main concern is with the distribution of income over time, not only between countries but also between regions within countries. I discuss the link between income levels and the distribution of income of individuals as depicted by the Kuznets curve (Kuznets 1955). The empirical convergence literature (see Abramovitz 1986, Baumol 1986) suggests that incomes of the richest countries in the world seem to converge, but this is not the case for the world as a whole. Barro (1991) and many subsequent studies based on an explicitly neoclassical growth model have shown that if one controls for diﬀerences in factor accumulation, countries seem to converge at the same rate but to diﬀerent steady state levels of income. Thus conditional convergence is taking place. However, the distribution of income levels between regions in a steady state is not made explicit in most of these latter studies. In this chapter I ﬁrst illustrate the changes in the dispersion of income between most of those countries in Europe which today are members of the European Union. I use long historical time series of gross domestic product (GDP) per capita, relying on Maddison (1995) in order to show that there have been periods of convergence as well as divergence in incomes among these countries....
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