Institutions and the convergence hypothesis : the cross-national evidence

In particular, income dispersion has failed to decline in groups of "ex ante rich" nations. This study finds strong convergence in per capita incomes among nations with institutions such as secure property rights that are conducive to saving, investing, and producing. Income dispersion falls in these samples even over the 1974-89 period, after the OECD stopped converging. Furthermore, incomes are shown to converge even among "ex ante rich" countries when measures of institutional quality are held constant. Additional evidence indicates "convergence club" membership is not limited to middle-income nations: even very backward nations have grown rapidly where property rights are protected. Most poor countries, however, have not established institutions necessary for attracting investment and advanced technology. (Author abstract)