Is economic growth of developing countries on track towards convergence

Neoclassical growth theory suggests that access to capital and technology by developing countries will spearhead convergence towards the per capita income of developed countries over time. Basically it means that incomes of poor nations will catch up (converge) with those in rich countries. As a result, all countries eventually will converge in terms of per capita income. The law of diminishing return of capital is one of the main drivers of this convergence. Higher marginal productivity of capital in developing countries along with lower marginal productivity in developed countries will push developing countries to catch up with developed countries. This in nutshell is the foundation of policy recommendations to developing economies to enable them to catch up with income levels of developed countries. The economic literature identifies two distinct types of convergence: β-convergence (Beta convergence/conditional convergence) and σ-convergence (Sigma convergence/absolute convergence). The conjecture that developing countries on the average will grow faster than the developed countries in the long run is labeled as beta (absolute) convergence. A propensity for the dispersion of per capita incomes measured by their standard deviation across a group of countries to fall over time has been characterized as sigma convergence. My research will focus on absolute convergence (Beta convergence) of per capita incomes of developing and developed countries. There is a widespread belief that with the continued strength of globalization, the convergence hypothesis is on track.

Do empirical works and the current data support this premise? This study will add to the existing economic growth literature by comparing per capita income of developing and developed countries from different regions of the world focusing on Beta convergence.

Methodology: Descriptive statistics and regression analysis will be used to test the convergence hypothesis using the latest data available.

Expected Results: Given the lack luster GDP growth rate in many developing countries, and even with poor growth rate in developed countries, the findings are expected to indicate that convergence has halted across a broad front.

Data source: World Bank: World Development Indicators.