Economic growth and club convergence: Is there a neighbour's effect?

The study investigates economic growth and club convergence in a cross‐country framework from 1970–1971 to 2014–2015. In particular, we test the club convergence hypothesis through a non‐parametric and spatial interaction setting. The kernel density estimate shows a cyclical behaviour of per capita incomes, albeit following a common steady state. The conditional distribution is concentrated around the mean indicating a similar relative position across the heterogeneous countries. The transitional probabilities are strong enough to demonstrate a significant sign of clubbing. On testing the convergence hypothesis, we perceive strong evidence of club convergence across the countries. A persistent spatial dependence is unveiled across the proximities, therefore confirming the neighbour's effects in club formation. The study realizes a need to harmonize the interaction between the countries to improve the conditions for achieving long‐run sustained economic growth.