Structural Breaks and Real Convergence in Opec Countries

Abstract

This article examines the real convergence hypothesis in OPEC countries (Algeria, Angola, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela) using time series techniques and allowing for structural breaks. The main results show lack of support for income convergence in OPEC countries. We only find evidence of catch-up with the U.S. economy for the case of Indonesia, and for Angola in the last years of the sample. These findings are in line with the “resource curse” literature, which suggests that natural resource dependence inhibits economic growth. Furthermore, the results suggest that the country's oil export dependence is negatively related with its per capita GDP growth rate.

JEL classification codes:

• C32
• O41

Key words:

• real convergence
• unit root tests
• OPEC countries
• structural breaks