LEARNING OBJECTIVES
After you have read this section, you should be able to answer the following questions:
What is balanced growth?
Why does balanced growth matter?
When will economies converge to a balanced-growth path?
We have seen that the accumulation of capital—other things being equal—leads economies to converge over time. However, we saw that the evidence for such convergence in the data is highly mixed. To understand more about when economies will and will not converge, we need a more complete theory of the sources of economic growth. In this section, we develop such a theory and then use it to look again at the question of convergence. We initially take as given— that is, as exogenous—the growth rates of human capital, the workforce, and the technology.
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