Advertisement

Club Convergence

  • Stilianos Alexiadis
Chapter
Part of the Advances in Spatial Science book series (ADVSPATIAL)

Abstract

Although the concept of ‘club convergence’ emerged from empirical evidence, its theoretical underpinnings can be found in neoclassical and endogenous growth models, outlined in Chaps. 2 and 3. Indeed, a prediction of several Endogenous Growth models, such as the ‘Technological Diffusion-Gap’ model, is that economies do not converge towards a common equilibrium. ‘New Economic Geography’ implies a polarisation of regions into different ‘clusters’, poor or ‘peripheral’ regions and rich or ‘central-core’ regions, with growing disparities and divergence among clusters. It is the purpose of this chapter to examine the theoretical framework for club convergence. Firstly, the notion of ‘club convergence’, as this has emerged from empirical studies, is introduced in Sect. 4.2. Section 4.3 outlines two theoretical approaches to multiple equilibria and club convergence proposed by Galor (1996) and Azariadis and Drazen (1990), which are, essentially, a reformulation of the neoclassical model. Section 4.4 describes the club convergence pattern within the framework of Endogenous Growth Theory, in which club convergence is attributed to the diffusion of technological innovations from leading economies. This process, however, appears to be exogenous and very little is said about how is determined. Diffusion of technology is not a simple and automatic process. Instead, it requires that lagging economies (countries or regions) should have the appropriate infrastructure or conditions to adopt or absorb the technological innovations. A simple model is developed in Sect. 4.5 in which club convergence is attributed to differences in the absorptive abilities of regions. Finally, Sect. 4.6 provides some conclusions.

Keywords

Multiple Equilibrium Technology Diffusion Human Capital Accumulation Endogenous Growth Model Neoclassical Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Abramovitz M (1986) Catching up, forging ahead and falling behind. J Econ Hist 46(2):385–406CrossRefGoogle Scholar
  2. Acs Z, Audretsch D, Feldman M (1994) R&D spillovers and recipient firms size. Rev Econ Stat 76(2):336–340CrossRefGoogle Scholar
  3. Alesina A, Rodrik D (1994) Distributive politics and economic growth. Q J Econ 109(2):465–490CrossRefGoogle Scholar
  4. Alexiadis S (2010b) The nexus between regional growth and technology adoption. A case for club convergence? Theoretical and Practical Research in economic Fields 1(1):4–11Google Scholar
  5. Alexiadis S (2011) Does technological heterogeneity promote regional convergence? Implications for regional policy and entrepreneurship’. Annals of Innovation & Entrepreneurship 2(1):1–7CrossRefGoogle Scholar
  6. Ames E, Rosenberg N (1963) Changing technological leadership and industrial growth. Econ J 73(289):13–31CrossRefGoogle Scholar
  7. Arrow K (1962) The economic implications of learning-by-doing. Rev Econ Stud 29(3):155–173CrossRefGoogle Scholar
  8. Azariadis C, Drazen A (1990) Threshold externalities in economic development. Q J Econ 105(2):501–526CrossRefGoogle Scholar
  9. Baland J, Francois P (1996) Innovation, monopolies and poverty trap. J Dev Econ 49(1):151–178CrossRefGoogle Scholar
  10. Barro R (1991) Economic growth in a cross-section of countries. Q J Econ 106(2):407–443CrossRefGoogle Scholar
  11. Barro R, Sala-i-Martin X (1997) Technology diffusion, convergence and growth. J Econ Growth 2(1):1–25CrossRefGoogle Scholar
  12. Baumol W (1967) Macroeconomics of unbalanced growth: the anatomy of urban crisis. Am Econ Rev 57(3):415–426Google Scholar
  13. Baumol W (1988) Is entrepreneurship always productive? J Dev Plann 18:85–93Google Scholar
  14. Baumol W, Nelson R, Wolf E (eds) (1994) Convergence of productivity – cross-national studies and historical evidence. Oxford University PressGoogle Scholar
  15. Becker G, Murphy K, Tamura R (1990) Human capital, fertility and economic growth. J Pol Econ 98(5):S12–S37CrossRefGoogle Scholar
  16. Ben-David D (1998) Convergence clubs and subsistence economies. J Dev Econ 55(1):155–171CrossRefGoogle Scholar
  17. Ben-David D, Papell D (2000) Some evidence on the continuity of the growth process among the G7 countries. Econ Inq 38(2):320–330Google Scholar
  18. Bernard A, Jones C (1996a) Technology and convergence. Econ J 106(437):1037–1044CrossRefGoogle Scholar
  19. Bode E, Nunnenkamp P, Waldkirch A (2012) Spatial effects of foreign direct investment in US States. Can J Econ 45(1):16–40CrossRefGoogle Scholar
  20. Cameron G, Proudman J, Redding S (2005) Technological convergence, R&D, trade and productivity growth. Eur Econ Rev 49(3):775–807CrossRefGoogle Scholar
  21. Canova F (2004) Testing for convergence clubs in income per-capita: a predictive density approach. Int Econ Rev 45(1):49–77CrossRefGoogle Scholar
  22. Cappelen A, Castellacci F, Fagerberg J, Verspagen B (2003) The impact of EU regional support on growth and convergence in the European Union. Journal of Common Market Studies 41(4):612–644Google Scholar
  23. Castellacci F, Archibugi D (2008) The technology clubs: the distribution of knowledge across nations. Res Policy 38(10):1659–1673CrossRefGoogle Scholar
  24. Cetorelli N (2002) Could Prometheus be bound again? A contribution to the convergence controversy. Journal of Economic Dynamics and Control 27(1):29–50CrossRefGoogle Scholar
  25. Chapman K, Walker D (1988) Industrial location: principles and policies. BlackwellGoogle Scholar
  26. Chatterji M (1992) Convergence clubs and endogenous growth. Oxford Review of Economic Policy 8(4):57–69CrossRefGoogle Scholar
  27. Cornwall J (1976) Diffusion, convergence and Kaldor’s laws. Econ J 86(342):307–314CrossRefGoogle Scholar
  28. Dahmén E (1988) “Development blocks” in industrial economics. Scandinavian Economic History Review 36(1):3–14CrossRefGoogle Scholar
  29. De la Fuente A (2000) Convergence across countries and regions: theory and empirics. European Investment Bank Papers 5(2):25–45Google Scholar
  30. De la Fuente A (2002) On the sources of convergence: a closer look at the Spanish regions. Eur Econ Rev 46(3):569–599CrossRefGoogle Scholar
  31. De Vor F, de Groot H (2010) Agglomeration externalities and localized employment growth: the performance of industrial sites in Amsterdam. Ann Reg Sci 44(3):409–431CrossRefGoogle Scholar
  32. Den Haan W (1995) Convergence in stochastic growth models: the importance of understanding why income levels differ. Journal of Monetary Economics 35(1):65–82CrossRefGoogle Scholar
  33. Desmet K, Fafchamps M (2005) Changes in the spatial concentration of employment across US Counties: a sectoral analysis: 1972–2000. J Econ Geogr 5(3):261–284CrossRefGoogle Scholar
  34. Dewhurst J (1998) Convergence and divergence in regional household incomes per-head in the United Kingdom, 1984–93. Appl Econ 30(1):31–35CrossRefGoogle Scholar
  35. Doloreux D, Dionne S (2008) Is regional innovation system development possible in peripheral regions? Some evidence from the case of La Pocatière, Canada. Entrepreneurship and Regional Development 20(3):259–283CrossRefGoogle Scholar
  36. Dowrick S, Gemmell N (1991) Industrialisation, catching-up and economic growth: a comparative study across the world’s capitalist countries. Econ J 101(405):263–275CrossRefGoogle Scholar
  37. Dowrick S, Nguyen D (1989) OECD comparative economic growth 1950–85: catch-up and convergence. Am Econ Rev 79(5):1010–1030Google Scholar
  38. Drennan M, Lobo J, Strumsky D (2004) Unit-root tests of σ income convergence across US metropolitan areas. J Econ Geogr 4(5):583–595CrossRefGoogle Scholar
  39. Dunford M, Smith A (2000) Catching-up or falling behind? Economic performance and regional trajectories in the New Europe. Economic Geography 76(2):169–195CrossRefGoogle Scholar
  40. Durlauf N (1993) Nonergodic economic growth. Rev Econ Stud 60(2):349–367CrossRefGoogle Scholar
  41. Durlauf S (1994) Spillovers, stratification and inequality. Eur Econ Rev 38(3–4):836–845CrossRefGoogle Scholar
  42. Durlauf S (1996) On the convergence and divergence of growth rates. Economic Journal 106(437):1016–1018CrossRefGoogle Scholar
  43. Fagerberg J (1994) Technology and international differences in growth rates. J Econ Lit 32(3):1147–1175Google Scholar
  44. Fagerberg J, Verspagen B (1996) Heading for divergence? Regional growth in Europe reconsidered. Journal of Common Market Studies 34(3):431–448CrossRefGoogle Scholar
  45. Funke M, Niebuhr A (2005) Regional geographic research and development spillovers and economic growth: evidence from West Germany. Reg Stud 39(1):143–153CrossRefGoogle Scholar
  46. Galor O (1996) Convergence? Inferences form theoretical models. Econ J 106(437):1056–1069CrossRefGoogle Scholar
  47. Galor O, Tsiddon D (1991) Technological breakthroughs and development traps. Econ Lett 37(1):11–17CrossRefGoogle Scholar
  48. Galor O, Tsiddon N (1997) The distribution of human capital and economic growth. J Econ Growth 2(1):93–124CrossRefGoogle Scholar
  49. Galor O, Zeira J (1993) Income distribution and macroeconomics. Rev Econ Stud 60(1):35–52CrossRefGoogle Scholar
  50. Gerschenkron A (1962) Economic backwardness in historical perspective. Bellknap PressGoogle Scholar
  51. Gomulka S (1983) Industrialisation and the rate of growth: Eastern Europe 1955–75. Journal of Post Keynesian Economics 5(3):388–396Google Scholar
  52. Gomulka S (1990) The theory of technological change and economic growth. RoutledgeCrossRefGoogle Scholar
  53. Goodfriend M, McDermott J (1998) Industrial Development and the Convergence Question. Am Econ Rev 88(5):1277–1289Google Scholar
  54. Griffith R, Redding S, Simpson H (2009) Technological catch-up and geographical proximity. J Reg Sci 49(4):689–720CrossRefGoogle Scholar
  55. Henderson V (2003b) The urbanisation process and economic growth: the so-what question. J Econ Growth 8(1):47–71CrossRefGoogle Scholar
  56. Howitt P, Mayer-Foulkes D (2005) R&D, implementation and stagnation: a Schumpeterian theory of convergence clubs. Journal of Money Credit and Banking 37(1):147–177CrossRefGoogle Scholar
  57. Inkster I (2002) Politicising the Gerschenkron schema: technology transfer, late development and the state in historical perspective. Journal of European Economic History 31(1):45–87Google Scholar
  58. Islam N (2003) What have we learnt from the convergence debate? J Econ Surv 17(3):309–362CrossRefGoogle Scholar
  59. Je Su J (2003) Convergence clubs among 15 OECD countries. Appl Econ Lett 10(2):113–118CrossRefGoogle Scholar
  60. Johnson P, Takeyama L (2001) Initial conditions and economic growth in the US States. Eur Econ Rev 45(4–6):919–927CrossRefGoogle Scholar
  61. Kangasharju A (1999) Relative economic performance in Finland: regional convergence, 1934–1993. Reg Stud 33(3):207–217CrossRefGoogle Scholar
  62. Keller W (2000) From Socialist to Mezzogiorno? Lessons on the role of technical change from East Germany’s post-World War II growth performance. J Dev Econ 63(2):485–514CrossRefGoogle Scholar
  63. Ketenci N, McCann P (2009) Regional restructuring and manufacturing firm performance in a Central-Asian transitions economy: observations from Kazakhstan. Letters in Spatial and Resource Sciences 2(1):11–21CrossRefGoogle Scholar
  64. Kristensen T (1974) Development in rich and poor countries. PraegerGoogle Scholar
  65. Maddison A (1982) Phases of capitalist development. Oxford University PressGoogle Scholar
  66. Martin R, Sunley P (1998) Slow convergence? New endogenous growth theory and regional development. Economic Geography 74(3):201–227CrossRefGoogle Scholar
  67. Nelson R (1960) Growth models and the escape from the equilibrium trap: the case of Japan. Econ Dev Cult Change 8(4):378–388CrossRefGoogle Scholar
  68. Nelson R (1981) Research on productivity growth and productivity differences: dead ends and new departures. J Econ Lit 19(3):1029–1064Google Scholar
  69. Nelson R, Phelps E (1966) Investment in humans, technological diffusion and economic growth. Am Econ Rev 56(2):69–75Google Scholar
  70. Nelson R, Winter S (1974) Neoclassical vs. evolutionary theories of economic growth: critique and prospectus. Econ J 84(336):886–905CrossRefGoogle Scholar
  71. Nelson R, Winter S (1982) An evolutionary theory of economic change. The Bellknap PressGoogle Scholar
  72. Neter J, Wasserman W, Kunter M (1990) Applied linear statistical models, 3rd edn. IrwinGoogle Scholar
  73. Parente S, Prescott E (1994) Barriers to technology adoption and development. J Pol Econ 102(2):298–321CrossRefGoogle Scholar
  74. Parente S, Prescott E (1999) Monopoly rights: a barrier to riches. Am Econ Rev 89(5):1216–1233CrossRefGoogle Scholar
  75. Peri G, Urban D (2006) Catching-up to foreign technology? Evidence on the Veblen-Gerschenkron effect of foreign investment. Reg Sci Urban Econ 36(1):72–98CrossRefGoogle Scholar
  76. Perroux F (1950) Economic space, theory and applications. Q J Econ 64(1):89–104CrossRefGoogle Scholar
  77. Phelps E (1966) Models of technical progress and the golden rule of research. Rev Econ Stud 33(2):133–145CrossRefGoogle Scholar
  78. Pigliaru F (2003) Detecting technological catch-up in economic convergence. Metroeconomica 54(2–3):161–178CrossRefGoogle Scholar
  79. Quah D (1996a) Regional convergence clusters in Europe. Eur Econ Rev 40(3–5):951–958CrossRefGoogle Scholar
  80. Quah D (1996b) Empirics for economic growth and convergence. Eur Econ Rev 40(6):1353–1376CrossRefGoogle Scholar
  81. Quah D (1997) Empirics for growth and distribution: polarisation, stratification and convergence clubs. J Econ Growth 2(1):27–59CrossRefGoogle Scholar
  82. Rodríguez-Pose A (1999b) Innovation prone and innovation averse societies: economic performance in Europe. Growth and Change 30(1):75–105CrossRefGoogle Scholar
  83. Romer P (1987a) Growth based on increasing returns due to specialisation. Am Econ Rev 77(2):56–62Google Scholar
  84. Saito H, Gopinath M (2011) Knowledge spillovers, absorptive capacity and skill intensity of Chilean manufacturing plants. J Reg Sci 51(1):83–101CrossRefGoogle Scholar
  85. Savvides A, Stegnos T (2000) Income inequality and economic development: evidence from the threshold regression model. Econ Lett 69(2):207–212CrossRefGoogle Scholar
  86. Scitovsky T (1954) Two concepts of external economies. J Pol Econ 62(2):143–151CrossRefGoogle Scholar
  87. Simon H (1972) From substantive to procedural rationality. In: McGuire C, Rander R (eds) Decision and organisation.Google Scholar
  88. Targetti F, Foti A (1997) Growth and productivity: a model of cumulative growth and catching-up. Camb J Econ 21(1):27–43CrossRefGoogle Scholar
  89. Teixeira A, Fortuna N (2010) Human capital, R&D, trade, and long-run productivity. Testing the technological absorption hypothesis for the Portuguese economy, 1960–2001. Res Policy 39(3):335–350CrossRefGoogle Scholar
  90. Tondl G (1999) The changing pattern of regional convergence in Europe. Jahrbuch fur Regionalwissenschaft 9(1):1–33Google Scholar
  91. Veblen T (1915) Imperial Germany and the industrial revolution. MacmillanGoogle Scholar
  92. Verspagen B (1992) Endogenous innovation in neoclassical growth models: a survey. Journal of Macroeconomics 14(4):631–662CrossRefGoogle Scholar
  93. Verspagen B (1995) Convergence in the global economy: a broad historical perspective. Structural Change and Economic Dynamics 6(2):143–165CrossRefGoogle Scholar
  94. Walters B (1995) Engendering macroeconomics: a reconsideration of growth theory. World Dev 23(11):1869–1880CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  • Stilianos Alexiadis
    • 1
  1. 1.Ministry of Rural Development and FoodsAthensGreece

Personalised recommendations