GLOBAL DIVERGENCE IN GROWTH REGRESSIONS

This paper extends the standard growth regression model by adding anassumption that a country follows the global technology frontier either fully or partially. This additional assumption changes significantly the growthregression model and its results in three main ways. First, it shows thatalthough a country converges to its long-run growth path, this path candiverge from the countries at the global frontier. We measure the degree ofdivergence for each country and find that most indeed diverge from thefrontier. Second, we estimate growth dynamics without controlling foradditional variables. Third, our new method enables us to disentangle theeffects of the explanatory variables on the long-run rate of growth from theshort-run effects.