Macroeconomics, 2nd Edition by Pearson

ECONOMIC GROWTH

453

Population growth reduces the growth rate in the capital stock per capita and

delays the onset of diminishing returns: the convergence rate is an increasing

function of the population growth rate.

Cashin and Sahay

35

estimated an absolute convergence model for Indian

states using 1961–1991 data and found that convergence was taking place in

the Indian states. However, their findings did not go through when the share

of manufacturing in each state’s net domestic product, which was included

as a control variable in the growth equation, was omitted from the regression

model. In that case, the estimated convergence ...