Working Papers

Glimpsing the End of Economic History? Unconditional Convergence and the Missing Middle Income Trap - Working Paper 438

10/1/16
Sutirtha Roy , Martin Kessler and Arvind Subramanian
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This paper suggests a reinterpretation of global growth—encompassing notions of unconditional convergence and the middle income trap—in the past 50 years through the lens of growth theory. We innovate by studying two modes of convergence: a classic “Solow” model where poorer countries catch up by growing faster on average; and a new “Wilde” model where catch-up growth is interpreted as growing faster than the frontier country, the United States. We apply these modes to both countries and people as units of analysis. We find that convergence has occurred faster and began earlier than widely believed. This is the case in particular after 2000, and when weighted by population, we also find no evidence of a middle income trap which we defined in two ways: whether it is easier to grow and converge at lower rather than middle levels of income. The second notion is whether having reached middle income status, middle income countries find it more difficult to converge normally and become advanced countries. The last 20-30 years have thus been a golden era of convergence, challenging the new conventional wisdom of secular stagnation.

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