Unconditional convergence exists after all!

My student Jason Hwang successfully defended his dissertation this morning. Probably the most important and interesting of his findings is that countries converge to the global productivity frontier in individual products unconditionally.  A country that exports, say, color TVs, will eventually and as a matter of course catch up with unit values of the richest countries that produce the same good, and will do so at a relatively rapid rate of 5% per year.  This is to be contrasted with convergence at the economy-level, which happens only conditionally--i.e., after a long list of prerequisites are satisfied--and much more slowly.  Rapidly growing countries are those that are, counterintuitively, farther away from the productivity frontier of the goods that they export.  Diversification of production acts like a convergence machine: it enables countries to get into the lower rungs of taller ladders. This is fascinating stuff, and opens up really new ways of looking at the links between structural change and economic convergence.    

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Very interesting.

So, my first thought is that this indicates that at some level lack of growth is lack of entry into enough product markets.

Can we safely say that slow growing countries are not entering the markets for moe "complex" products or is the relationship more sophisticated than that.

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This does look very interesting.

The link to the paper contains a blank page for now, so without having read it, my guess is that the policy implications are ambigous.

Assuming that the majority of investment is in the private sector (I don't know that) then the data observed reflects investors having seen a profitable opportunity, and these are the results in the businesses they have built.

If you change the way that investment decisions are taken by, for example, introducing a policy of investing in diverse sectors where no entrepreneur has yet seen an opportunity and invested already, because you have read this paper and think it will lead to growth, then observed behaviour may change.

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Could it be that this is simply the law of one price at work? If capital is very mobile, transportation cheap and trade free, there should be absolute equality in productivity in export goods So this may simply be an endogenous outcome and not a policy variable.

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