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Testing The Convergence Hypothesis In Solow Growth Model: A Statistical Evidence From Saarc Economies

Author

Listed:
  • MUHAMMAD SAFDAR

    (Pakistan Institute of Development Economics, Islamabad Pakistan, Email: safdar.qau890@gmail.com)

  • AHMAD NAWAZ

    (Department of Economics, University of Sahiwal, Sahiwal, Pakistan, Email: ahmadnawaz@uosahiwal.edu.pk)

Abstract

The literature reveals three concepts of convergence, namely Absolute/Unconditional Beta convergence, Sigma convergence, and Conditional Beta convergence. Annual data of real GDP per capita over the period 1972-2012 of six SAARC countries has been utilized to test the convergence hypotheses. OLS estimates from the cross-sectional data revealed that there is no evidence of sigma convergence. A panel data approach has also been applied to test the convergence of real GDP per capita among six SAARC countries. Empirical results from both Levin, Lin, and Chu and the Hadri z-stat showed no evidence of convergence among the SAARC countries. Thus, the results of our study are not consistent with the basic growth model of Solow-Swan (1956) which posits the existence of conditional convergence of income among developed and developing economies.

Suggested Citation

  • Muhammad Safdar & Ahmad Nawaz, 2020. "Testing The Convergence Hypothesis In Solow Growth Model: A Statistical Evidence From Saarc Economies," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 9(2), pages 60-73, June.
    • Handle: RePEc:rfh:bbejor:v:9:y:2020:i:2:p:60-73
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    References listed on IDEAS

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    More about this item

    Keywords

    Beta convergence; Sigma convergence; Solow; SAARC; IFS;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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