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The truth about convergence of living standards across the world - Essay Example

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Convergence issue is very prominent in economic growth literature. There are many theories associated with finding empirical evidences to explain economic growth of a country. In this paper, the proponent tries to integrate pragmatic evidences that could explain economic growth …
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The truth about convergence of living standards across the world
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Download file to see previous pages Concerning this, reviewing the academic literature in this issue would make sense. A certain study was able to probe and contribute to the upward spiral number of economic growth literatures by employing other social indicators alternative to per capita income (Hobijn and Franses, 2001; Ciscar and Soria, 2000; Fung, 2009; Welsch and Bonn, 2008). Some of these papers found that the convergence in GDP per capita does not necessarily mean convergence in other social indicators. However, as observed the gap between rich and poor can be examined in real GDP per capita and in living standards. Another study stood in stark contrast with the findings generated by Hobijn and Franses (Neumayer, 2003). In this research, various tests of convergence were employed including regression analysis, the coefficient of variation, kernel density estimates and transition probability matrices. This study contains an argument that convergence should be measured based on the living standards and not in achievement index. Concerning this, the proponent of the study chose to include life expectancy, infant survival, educational enrolment, literacy and telephone and television availability as important aspects of living standards. Neumayer found that there was a strong evidence to support the convergence of the mentioned aspects of living standards. ...
Based on the above findings, it is imperative to consider that economic convergence remains a very important economic issue for more relevant academic explorations. Regarding this, the proponent of this paper tries to understand up to what extent is the hypothesis that there will eventually be convergence of living standards across the world supported by theoretical and empirical research. Per capita GDP (Gross Domestic Product) In many convergence studies, per capita GDP (Gross Domestic Product) is the common measure of the country’s economic growth. After all, it measures the total output of a country by dividing the GDP with the number of people in it (Todaro and Smith, 2011; Angeles, 2008; Egger et al., 2004; ). Based on this logical approach behind the meaning of per capita GDP, many economists find it useful to use it for comparing relative performance between countries. When one wants to know the level of productivity of a certain country, a rise in per capita GDP could potentially signal economic growth. Therefore, per capita income of poor countries should relatively higher than developed countries in order to realize convergence of living standards. However, this argument is widely debatable because there are also many studies trying to point out that there is continuing divergence of living standards all over the world (Cole and Neumayer, 2003; Portnov and Erell, 2004; Allen, 2012; Ravallion and Jalan, 1996; Morgan, 2009; Rakowski, 1994; Decancq et al., 2009). In the first place, there are also many empirical measures associated with finding the living standards. It turns out that per capita GDP is just one of them. Convergence ...Download file to see next pagesRead More
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