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3 Convergence If you recall in class we talked about: absolute convergence and ii. conditional convergence. Absolute convergence refers to the fact...
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This is a macroeconomics question.

2.3 Convergence If you recall in class we talked about: i. absolute convergence and ii. conditional convergence.
Absolute convergence refers to the fact that economies with lower starting values of capital per person have higher growth rates. Absolute convergence implies that in
the long run GDP per worker (or per capita) converges to the same growth path in
all countries so that all countries will end up with the same level of output. Conditional convergence instead predicts that each country will converge to its spe-
ciﬁc steady-state level. In this setting, poorer countries should grow faster but only
conditional on economies having the same underlying characteristics {i.e. the same structural parameters). (a) Discuss the empirical evidence related to absolute and conditional convergence (b) Is the empirical evidence you discussed in part (a) consistent with the theoretical
predictions of the Solow model? Explain with words and a ﬁgure.

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