Growth and convergence under uniform and varying rate of change of technology

Abstract

This paper seeks to extend the debate on growth and convergence by estimating growth equations which allow for varying rate of change in technology (TFP) as well as the standard assumption of uniform rate. Rate of change of TFP is proxied using an index of patent protection. The dataset used in the paper includes 25 high income countries, 20 middle income countries, 28 low income countries and 16 countries which have transitioned across income categories during the time period considered in this paper. The results of the paper, estimated using the generalized method of moments (GMM) approach, show significant differences when the rate of change of TFP is assumed to be varying as opposed to being uniform. Significantly, the rate of convergence differs significantly across the subgroups of countries under the assumption of varying rate of change of TFP. Rates of convergence under the assumption of varying rates are clearly higher than those under the uniform rate for high income countries while the results for countries in other income categories are mixed.

Keywords

• economic growth
• convergence
• patents
• TFP
• panel data