Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure

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Empirics for Economic Growth and Convergence by Danny T. Quah LSE Economics Department and CEP CENTRE FOR ECONOMIC PERFORMANCE DISCUSSION PAPER NO. 253 July 1995 This paper is produced as part of the Centre 's Programme on National Economic Performance.

important in re-shaping this article. X. Sala-i-Martin has generously donated insight and time to try and make me understand. He need not, however, agree with all my statements below. All calculations were performed using the econometrics shell tsrf.

 Comments by J. Dolado, F. Giavazzi, and an anonymous referee have been

Nontechnical Summary The convergence hypothesis|that poor economies might \catch up"| has generated a huge empirical literature: this paper critically reviews
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Over-simplifying drastically, a convenient way to distinguish the two views on growth is to ask, \Are poor economies incipiently catching up with those already richer? Or, instead, are they caught in a poverty trap?" Many caveats would be needed for such an evaluation to be proper, but that catch-up could occur has come to be known as the convergence hypothesis. What is important, though, is that such a hypothesis bears independent interest in economics. Di erent kinds of economic convergence are routinely discussed and widely debated. Examples include convergence in incomes between rich and poor parts of the European Union; in plant and rm size in industries; in economic activity across di erent regions (states, provinces, districts, or cities) within the same country; in asset returns and in ation rates across countries in a common trade area; in political attitudes across di erent groups; in wages across industries, professions, and geographical regions. These examples show that convergence is simply a basic empirical issue, one that re ects on|among other things|polarization, income distribution, and inequality. Certainly, understanding economic growth is important. But growth is only one of many di erent areas in economics
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