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Everything you know about cross-country convergence is (now) wrong.
https://www.cgdev.org/blog/everything-you-know-about-cross-country-convergence-now-wrong
In which @dev_a_patel, @arvindsubraman, and I take issue with a new JEL review that seems to ignore the last quarter-century of economic growth.
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https://www.cgdev.org/blog/everything-you-know-about-cross-country-convergence-now-wrong
In which @dev_a_patel, @arvindsubraman, and I take issue with a new JEL review that seems to ignore the last quarter-century of economic growth.
1/
Here's the abstract of the forthcoming JEL review by Paul Johnson and Chris Papageorgiou, "What Remains of Cross-Country Convergence?"
The conclusion is, "not much."
https://www.aeaweb.org/articles?id=10.1257/jel.20181207&&from=f
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The conclusion is, "not much."
https://www.aeaweb.org/articles?id=10.1257/jel.20181207&&from=f
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Problem is, in the 25 years since the growth literature concluded that rich and poor countries aren't converging, the exact opposite has happened -- and the literature doesn't seem to have noticed.
Unconditional beta convergence now holds.
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Unconditional beta convergence now holds.
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It's not just China and India. Since 1990, 65% of the 43 low-income countries have grown faster than the high-income average, as have 82% of the 62 middle-income countries.
Side note: let's please stop talking about a middle income trap!
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Side note: let's please stop talking about a middle income trap!
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Don't misread us. All is not well in the world. There are new headwinds that may slow developing country growth, from the backlash against globalization to catastrophic climate change.
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But if the JEL is reviewing 25 years of cross-country convergence literature, it seems odd to skip over 25 years of actual convergence.
/end
/end
Updating this thread with a number of thoughtful reactions (some positive, some not) to our post:
1. Paul Johnson and Chris Papageorgiou respond in the comments:
http://disq.us/p/1wmjmv6
1. Paul Johnson and Chris Papageorgiou respond in the comments:
http://disq.us/p/1wmjmv6
2. Branko Milanovic on what's happened to the global income distribution over the same period. https://twitter.com/BrankoMilan/status/1053062462201847809
3. Noah Smith on how developing countries are finally escaping the economic burden of colonialism. https://www.bloomberg.com/view/articles/2018-10-18/why-the-developing-world-started-gaining-on-the-west
4. Paul Krugman on why rich countries stopped converging when poor and middle-income countries started. https://twitter.com/paulkrugman/status/1053600477148049408
5. Brad DeLong argues recent convergence says more about rich countries' handling of the Great Recession than what was going on in the developing world. https://www.bradford-delong.com/2018/10/how-confident-are-we-that-middle-income-convergence-to-the-global-productivity-frontier-is-now-the-rule-not-at-all.html
[Sorry, this thread is becoming an online manel. As someone who spends most of his time in micro development econ circles, wow... there's a lotta dudes in macro.]
6. @DietzVollrath noting it's "best not to think of unconditional β-convergence as representing some kind of structural truth about economic growth" but rather "as a summary statistic of the general experience of poor countries in a given time frame." https://twitter.com/DietzVollrath/status/1058474103764471808
Agree completely that our "results tell us that something changed around 1990 such that many poor countries grew faster than rich countries, relative to the period from 1960 to 1990. But it doesn’t tell us what or why it changed, or if it will persist."
