The Solow growth model posits that conditional convergence occurs when economies with similar institutional frameworks exhibit faster growth rates in lower-income states relative to their steady-state levels, ultimately converging toward identical output per capita once such homogeneity is established. This mechanism relies on the formal principle of diminishing returns to physical and human capital accumulation alongside non-zero exogenous depreciation and savings parameters. Within macroeconomic theory, this concept serves as a boundary condition distinguishing between unconditional convergence predictions and those restricted by structural heterogeneity regarding institutions.
The Solow growth model posits that conditional convergence occurs when economies with similar institutional frameworks exhibit faster growth rates in lower-income states relative to their steady-stat…