Income Convergence within MENA countries: a panel unit root approach

This article aims at testing the convergence hypothesis in MENA region using new tests of a unit root inpanel data. Evans and Karras [Evans P., & Karras G. (1996). Convergence revisited. Journal of MonetaryEconomics, 37, 249–265] and Bernard and Jones [Bernard A., & Jones C. I. (1996). Productivity acrossindustries and countries: Time series theory and evidence. The Review of Economics and Statistics, 135–146]recommend this technique to evaluate the income convergence hypothesis. According to them it avoidseconometric problems of the cross-countries growth regressions testing convergence and sample bias ofthe multivariate cointegration techniques. We test for both absolute and the conditional convergence withpanel unit root tests using the Summers and Heston's data 5.6 and 6.1 on the periods of 1960 to 1990 andfrom 1960 to 2000. The absolute convergence hypothesis use panel unit roots test with no fixed individualeffects. The catching-up hypothesis is not rejected for most groups of countries of the region during bothperiods. If we allow a break in the unit root tests, the hypothesis is not rejected for more groups. Theconditional convergence requires panel unit root tests with fixed individual effects. Again, during the wholeperiods, the conditional convergence is not rejected for the major part of the remaining groups of MENAcountries.