Macroeconomics, 2nd Edition by Pearson

452

MACROECONOMICS

group of countries.

33

The theory gets better empirical backing if we allow for

heterogeneity across economies in the sense that economies do not have the

same steady states. If steady states differ, then, an economy grows faster, the

further it is from its own steady-state value, a concept known as

CONDITIONAL

CONVERGENCE

. This concept is illustrated in Figure 16.9, where two economies

differ in only two respects—they have different initial stocks of capital per per-

son,

k

(0)

poor



k

(0)

rich

, and, secondly, they have different saving rates,

s

poor



s

rich

.

Then, it need not be the case that ...