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Does convergence of incomes still exist among developed economies? Time series evidence in G7 countries

  • Sakiru Adebola SOLARIN

    (Multimedia University Malaysia, Malaysia)

In this paper, we examine the presence of convergence of real per capita incomes in G7 countries for the period of 1870-2008, using the group average and pairwise approach. Lee and Strazicich (2003, 2004) unit root tests that provide for structural break(s) are utilised to verify incidence of stochastic convergence, a necessary condition for conditional convergence, while Carlino and Mills (1993) method is employed to confirm the existence of β-convergence, a sufficient requirement for conditional convergence. Among the possible 21 pairwise stochastic convergence cases, we observe nine pairwise stochastic convergence cases, with Japan as the only country not to have stochastic convergence with any of the G7 countries. Although Germany, France and the US stochastically converge towards the G7 average, only the US conditionally converges to the average of G7 countries.

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Article provided by Asociatia Generala a Economistilor din Romania - AGER in its journal Theoretical and Applied Economics.

Volume (Year): XVIII(2013) (2013)
Issue (Month): 12(589) (December)
Pages: 57-66

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Handle: RePEc:agr:journl:v:12(589):y:2013:i:12(589):p:57-66
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  1. Le Pen, Yannick, 2011. "A pair-wise approach to output convergence between European regions," Economic Modelling, Elsevier, vol. 28(3), pages 955-964, May.
  2. Hashem Pesaran, M., 2007. "A pair-wise approach to testing for output and growth convergence," Journal of Econometrics, Elsevier, vol. 138(1), pages 312-355, May.
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  5. Loewy, Michael B. & Papell, David H., 1996. "Are U.S. regional incomes converging? Some further evidence," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 587-598, December.
  6. Lee, Junsoo & Strazicich, Mark C, 2001. " Break Point Estimation and Spurious Rejections with Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-58, December.
  7. Don Webber, 2001. "A slowing of national income convergence," Applied Economics Letters, Taylor & Francis Journals, vol. 8(11), pages 709-711.
  8. Seya, Hajime & Tsutsumi, Morito & Yamagata, Yoshiki, 2012. "Income convergence in Japan: A Bayesian spatial Durbin model approach," Economic Modelling, Elsevier, vol. 29(1), pages 60-71.
  9. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  10. Mikael Linden, 2002. "Trend model testing of growth convergence in 15 OECD countries, 1946-1997," Applied Economics, Taylor & Francis Journals, vol. 34(2), pages 133-142.
  11. Strazicich, Mark C. & Lee, Junsoo & Day, Edward, 2004. "Are incomes converging among OECD countries? Time series evidence with two structural breaks," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 131-145, March.
  12. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers.
  13. Le Pen, Yannick, 2011. "A pair-wise approach to output convergence between European regions," Economics Papers from University Paris Dauphine 123456789/6806, Paris Dauphine University.
  14. Yamamura, Eiji & Shin, Inyong, 2008. "The benefit of efficiency improvement on growth and convergence: A study using Japan panel data," Economics Letters, Elsevier, vol. 99(1), pages 209-211, April.
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