Convergence clubs in Latin America

ABSTRACT

The aim of this work is to identify convergence clubs in 17 Latin American countries in terms of GDP per capita during the period 1990–2014. To do this, we apply the methodology developed by Phillips-Sul in order to identify the different convergence clubs on the path of growth in the Latin American economy over this period. The empirical results strongly support the existence of convergence clubs, indicating that the Latin American economy consists of four groups, each converging towards its own steady-state path, with two countries being divergent.

KEYWORDS:

• Convergence
• club convergence
• log t-test
• Latin America

JEL CLASSIFICATION:

• C33
• O40
• O47

 Disclosure statement 

No potential conflict of interest was reported by the authors.

Notes

¹ The sample is composed of Central and South American countries although Belize, Guyana and Surinam were excluded from our sample because of their small economic size (they only represented about the 0.2% of the Latin America GDP in 2014).

² The relative transition path curve draws an individual path for each country relative to the average panel of data; it measures the trajectory of each country from a starting position relative to the path of common growth. When there is a common path of growth between countries, it could give a convergence club within the set of countries and, in the same way, could trace the path of common growth of the club on the data panel.

³ The coefficient ‘β’ provides a scaled estimator of the speed of convergence parameter α, specifically, β = 2α. See Appendix B, Phillips and Sul (2007).