You learned in intermediate macroeconomics that certain macroeconomic growth models
predict conditional convergence or a catch up effect in per capita GDP between the
countries of the world.That is, countries which are further behind initially in per-capita
GDP will grow faster than the leader.You gather data from the Penn World Tables to test
this theory.
(a)By limiting your sample to 24 OECD countries, you hope to have a more homogeneous
set of countries in your sample, i.e., countries that are not too different with respect to
their institutions.To simplify matters, you decide to only test for unconditional
convergence.In that case, the laggards catch up even without taking into account
differences in some of the driving variables.Your scatter plot and regression for the time
period 1975-1989 are as follows:
$$\begin{aligned}
\widehat { g 8975 } = & 0.024 - 0.005 P C G D P 75 _ { - } U S ; R ^ { 2 } = 0.025 , S E R = 0.006 \
& ( 0.06 ) ( 0.008 )
\end{aligned}$$ where $\widehat { g 8975 }$ is the average annual growth rate of per capita GDP from 1975-1989, and PCGDP75_US is per capita GDP relative to the United States in 1975. Numbers in parenthesis are heteroskedasticity-robust standard errors. Interpret the results.Is there indication of unconditional convergence? What critical
value did you use?

Question

You learned in intermediate macroeconomics that certain macroeconomic growth models
predict conditional convergence or a catch up effect in per capita GDP between the
countries of the world.That is, countries which are further behind initially in per-capita
GDP will grow faster than the leader.You gather data from the Penn World Tables to test
this theory.
(a)By limiting your sample to 24 OECD countries, you hope to have a more homogeneous
set of countries in your sample, i.e., countries that are not too different with respect to
their institutions.To simplify matters, you decide to only test for unconditional
convergence.In that case, the laggards catch up even without taking into account
differences in some of the driving variables.Your scatter plot and regression for the time
period 1975-1989 are as follows: 
$$\begin{aligned}
\widehat { g 8975 } = & 0.024 - 0.005 P C G D P 75 _ { - } U S ; R ^ { 2 } = 0.025 , S E R = 0.006 \
& ( 0.06 ) ( 0.008 )
\end{aligned}$$ where $\widehat { g 8975 }$ is the average annual growth rate of per capita GDP from 1975-1989, and PCGDP75_US is per capita GDP relative to the United States in 1975. Numbers in parenthesis are heteroskedasticity-robust standard errors. Interpret the results.Is there indication of unconditional convergence? What critical
value did you use?

Quizplus · Accepted Answer

The Answer of You learned in intermediate macroeconomics that certain macroeconomic growth models
predict conditional convergence or a catch up effect in per capita GDP between the
countries of the world.That is, countries which are further behind initially in per-capita
GDP will grow faster than the leader.You gather data from the Penn World Tables to test
this theory.
(a)By limiting your sample to 24 OECD countries, you hope to have a more homogeneous
set of countries in your sample, i.e., countries that are not too different with respect to
their institutions.To simplify matters, you decide to only test for unconditional
convergence.In that case, the laggards catch up even without taking into account
differences in some of the driving variables.Your scatter plot and regression for the time
period 1975-1989 are as follows: 
$$\begin{aligned}
\widehat { g 8975 } = & 0.024 - 0.005 P C G D P 75 _ { - } U S ; R ^ { 2 } = 0.025 , S E R = 0.006 \
& ( 0.06 ) ( 0.008 )
\end{aligned}$$ where $\widehat { g 8975 }$ is the average annual growth rate of per capita GDP from 1975-1989, and PCGDP75_US is per capita GDP relative to the United States in 1975. Numbers in parenthesis are heteroskedasticity-robust standard errors. Interpret the results.Is there indication of unconditional convergence? What critical
value did you use?

You Learned in Intermediate Macroeconomics That Certain Macroeconomic Growth Models