The new evidence to tendency of convergence in Solow model

This paper tests the hypothesis in the revised endogenous dynamic Solow model that there exists dynamic convergence to the moving steady-state as a single economy grows. The convergence in the revised endogenous dynamic Solow model implies that the real interest rate and the growth rate of income per capita in an economy would move together, i.e., they would be cointegrated in empirical terms. Taking the U.S. economy as our research subject, we test this hypothesis by investigating the cointegration between the U.S. real interest rate and its growth rate of income per capita during a fifty-year period from 1951 to 2000. Our results show that the U.S. real interest rate and its growth rate of income per capita move together over time, providing strong evidence to support the dynamic convergence hypothesis. •We test that dynamic convergence to the moving steady-state exists in economic growth.•We show the cointegration b/w the real interest rate and the growth of income per capita.•Convergence in the revised endogenous dynamic Solow model predicts the cointegration.•The U.S. evidence supports the hypothesis of the dynamic convergence in Solow model.