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A Pair-wise Approach to Testing for Output and Growth Convergence

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  • Pesaran, M.H.

Abstract

This paper proposes a pair-wise approach to testing for output convergence that considers all N(N-1)/2 possible pairs of log per capita output gaps across N economies. A general probabilistic definition of output convergence is also proposed. The approach is compatible with individual output series having unit roots, does not involve the choice of a reference country in computation of output gaps, and can be applied when N is large relative to T. The test is applied to output series in the Penn World Tables (1950-2000), and to Maddison's historical series (1870-2000). Overall, the results do not support output convergence and suggest that the findings of convergence clubs in the literature might be spurious. However, significant evidence of growth convergence is found. Non-convergence of log per capita outputs combined with growth convergence suggests that there are important country-specific factors that render output gaps highly persistent.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0453.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0453.

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Length: 66
Date of creation: Oct 2004
Date of revision:
Handle: RePEc:cam:camdae:0453

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Related research

Keywords: Economic Growth; Panel Data Models; Common Technological Shocks; Convergence;

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  1. Steven N. Durlauf & Danny T. Quah, 1998. "The New Empirics of Economic Growth," Working Papers 98-01-012, Santa Fe Institute.
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  12. Camarero, Mariam, & FlĂ´res, R. & C. Tamarit, 2002. "Time series evidence of international output convergence in Mercosur," Computing in Economics and Finance 2002 87, Society for Computational Economics.
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  15. Andrew B. Bernard & Steven N. Durlauf, 1994. "Interpreting Tests of the Convergence Hypothesis," NBER Technical Working Papers 0159, National Bureau of Economic Research, Inc.
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  17. Bianchi, Marco, 1997. "Testing for Convergence: Evidence from Non-parametric Multimodality Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 393-409, July-Aug..
  18. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
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