JOURNAL OF APPLIED BUSINESS AND ECONOMICS
Conditional Convergence: Evidence from the Solow Growth Model
Author(s): Reginald Wilson
Citation: Reginald Wilson, (2017) "Conditional Convergence: Evidence from the Solow Growth Model," Journal of Applied Business and Economics, Vol. 19, Iss.6, pp. 111-120
Article Type: Research paper
Publisher: North American Business Press
Abstract:
The Solow growth model indicates that more than half of the variation in gross domestic product per capita (GDP per capita) is attributed to savings rates and population growth. This paper investigates whether the Solow growth model also explains conditional convergence for three developing countries (Argentina, Cameroon, and Kenya), using a methodology that is consistent with Carlino and Mills (1996). The results suggest that the Solow growth model correctly predicts that an increase in the savings-investment ratio leads to capital accumulation. However, additional analyses indicate that an increase in capital per capita may not immediately follow a higher savings-investment ratio.