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Galton's fallacy and tests of the convergence hypothesis

Quah, Danny (1993) Galton's fallacy and tests of the convergence hypothesis. Econometrics; EM/1993/265, EM/1993/265. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Identification Number: EM/1993/265

Abstract

Recent tests for the convergence hypothesis derive from regressing average growth rates on initial levels: a negative initial coefficient is interpreted as convergence. These tests turn out to be plagued by Galton's classical fallacy of regression towards the mean. Using a dynamic version of Galton's fallacy, I establish that coefficients of arbitrary signs in such regressions are consistent with an unchanging cross-section distribution of incomes. Alternative, more direct empirics used here show a tendency for divergence, rather than convergence, of cross-country incomes.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 1993 the author
Subjects: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Date Deposited: 27 Apr 2007
Last Modified: 01 Oct 2010 08:46
URI: http://eprints.lse.ac.uk/id/eprint/2186

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