TITLE:
Conditional Beta-Convergence by Gravity
AUTHORS:
Nico Stoeckmann
KEYWORDS:
Growth, Trade, TFP, Inequality, Conditional Beta-Convergence, Gravity Model
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.1,
February
8,
2022
ABSTRACT: Globalization and the international interdependence
of states have reached their climax at the beginning of the 21st century. At
the same time, growing inequalities between and within countries are leaving
some behind. While a variety of models have
sufficiently explained national divergence, international divergence
still remains subject of numerous studies. This work contributes to the set of
possible explanations for worldwide disparities by combining the ideas of
classical growth theory with the gravity model of trade. The circular relations between GDP, trade flows and TFP then
explain long term differences in the development of states. Resulting path
dependencies thus can be explained by an International Innovation Spiral that
continuously leads developed economies towards potential higher outputs while
existing alongside national peculiarities. In this way, the importance of trade
unions and the openness to international markets can be theoretically further
substantiated.