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

  • Pesaran, M.H.

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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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
Note: EM
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
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  8. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
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  10. Durlauf, S.M. & Johnson, P.A., 1995. "Multiple Regimes and Cross-Country Growth Behavior," Working papers 9419r, Wisconsin Madison - Social Systems.
  11. Binder, M. & Pesaran, M.H., 1996. "Stochastic Growth," Cambridge Working Papers in Economics 9615, Faculty of Economics, University of Cambridge.
  12. 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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  14. Binder, Michael & Pesaran, M Hashem, 1999. " Stochastic Growth Models and Their Econometric Implications," Journal of Economic Growth, Springer, vol. 4(2), pages 139-83, June.
  15. Xavier Sala-i-Martin, 2002. "The disturbing "rise" of global income inequality," Discussion Papers 0102-44, Columbia University, Department of Economics.
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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. 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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