Pan, Lei; Posch, Olaf; Wel, Michel van der - School of Economics and Management, University of Aarhus - 2012
We propose a model to study economic convergence in the tradition of neoclassical growth theory. We employ a novel stochastic set-up of the Solow (1956) model with shocks to both capital and labor. Our novel approach identifies the speed of convergence directly from estimating the parameters...