Initial human capital or the rule of law

What matters for the income convergence of poor countries?

Faiza Azhar Khan, John Hudson

Research output: Contribution to journalArticle

2 Citations (Scopus)
82 Downloads (Pure)

Abstract

The article analyses conditional β-convergence among the low income countries using a panel data framework covering the period 1960 to 2008. The estimation of conditional income convergence is based on the augmented Solow model with system GMM technique for the dynamic panel data. More importantly, the article assesses the role of initial human capital stock and the rule of law in the income convergence of poor countries by considering further categorizations of the poor countries based on these two variables. This is the first study on the comparative properties of human capital and the rule of law in the income convergence of poor countries utilizing a dynamic panel framework. The full sample of low income countries does not show any evidence of conditional income convergence. The categorizations on the basis of initial human capital stock do not alter the conclusion of no income convergence. However, the subsample of low income countries with a better rule of law exhibits positive evidence of convergence towards the steady states. The article concludes that there exists a greater role of the rule of law, than initial human capital stock, in the income convergence of poor countries and vice versa for the high and middle income countries.
Original languageEnglish
Pages (from-to)179-189
Number of pages11
JournalApplied Economics
Volume46
Issue number2
Early online date26 Sep 2013
DOIs
Publication statusPublished - Jan 2014

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Human capital
Income convergence
Rule of law
Low-income countries
Capital stock
Dynamic panel data
Solow model
β-convergence
Panel data
System-GMM
Dynamic panel
Income

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Initial human capital or the rule of law : What matters for the income convergence of poor countries? / Khan, Faiza Azhar; Hudson, John.

In: Applied Economics, Vol. 46, No. 2, 01.2014, p. 179-189.

Research output: Contribution to journalArticle

Khan, Faiza Azhar ; Hudson, John. / Initial human capital or the rule of law : What matters for the income convergence of poor countries?. In: Applied Economics. 2014 ; Vol. 46, No. 2. pp. 179-189.
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