Conditional Convergence: Evidence from the Solow Growth Model

Abstract

The Solow growth model indicates that more than half of the variation in gross domestic product per capita (GDP per capita) is attributed to savings rates and population growth. This paper investigates whether the Solow growth model also explains conditional convergence for three developing countries (Argentina, Cameroon, and Kenya), using a methodology that is consistent with Carlino and Mills (1996). The results suggest that the Solow growth model correctly predicts that an increase in the savings-investment ratio leads to capital accumulation. However, additional analyses indicate that an increase in capital per capita may not immediately follow a higher savings-investment ratio.