Resource capacity and economic growth convergence

Resource accumulation has been identified, with technological change, as a major explanatory factor of economic growth convergence. At the same time, resource capacity may act as a growth limiting factor. Under-investment may have a moderator effect on the economic growth convergence process, while path-dependencies may be observed. Using a tailored non-parametric model and a unique sample of 92 countries all around the world for the 1965–2019 period, we study the role of resource capacity from a new angle. First, we measure potential countries’ under-investment. Next, we quantify its role in the economic growth convergence process. Our findings reveal that under-investment exists and that it represents a brake on economic growth convergence. However, such an effect can be counterbalanced by promoting technological advances or creating a more favourable resource environment. Finally, we run several sensitivity tests to assess the robustness of our findings.