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Convergence test in the presence of structural changes: an empirical procedure based on panel data with cross-sectional dependence

Author

Listed:
  • Abdou-Aziz Niang

    (LEG/AMIE - CNRS UMR 5118 - Université de Bourgogne)

  • Marie-Claude Pichery

    (LEG/AMIE - CNRS UMR 5118 - Université de Bourgogne)

  • marcelin Edjo

Abstract

This paper presents an essay on empirical testing procedure for economic convergence. Referring to the unit root test proposed by Moon and Perron (2004), we proposed a modified Evans (1996) testing procedure of the convergence hypothesis. The advantage of this modified procedure is that it makes possible to take into account cross-sectional dependences that affect GDP per capita. It also allows to take into account structural instabilities in these aggregates. The application of the procedure on OECD member countries and CFA zone member countries leads to accept the hypothesis of economic convergence for these two groups of countries, and it shows that the convergence rate is significantly lower in the OECD sample. However, the results of the tests applied to the Global sample composed by all countries in these two samples conclude a rejection of the convergence hypothesis.

Suggested Citation

  • Abdou-Aziz Niang & Marie-Claude Pichery & marcelin Edjo, 2010. "Convergence test in the presence of structural changes: an empirical procedure based on panel data with cross-sectional dependence," LEG - Document de travail - Economie 2010-03, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
    • Handle: RePEc:lat:legeco:e2010-03
    Note: This work is dedicated to the memory of Marcellin EDJO, an economist at the BCEAO, who, before disappearing prematurely December 14, 2008 in Dakar, had contributed to a first version of this paper. He also conducted other works addressing economic convergence in the framework of properties of non-stationary series.
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    More about this item

    Keywords

    beta-convergence; Unit root; Panel data; Factor model; Cross-sectional dependence; Structural change;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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