New evidence on the convergence of international income from a group of 29 countries

Abstract

We evaluate the empirical evidence regarding stochastic convergence in income across a group of 29 countries. Our results are based on a new unit root test developed by Popp (2008) that estimates the break-date more accurately and does not suffer from size distortions in the presence of a break. Our results reveal considerably less evidence of stochastic convergence compared with previous studies.

Keywords:

• convergence of income
• stochastic convergence
• trend-stationary
• unit root

JEL Classification:

• C32
• O4

Notes

¹Details regarding the Perron-type unit root tests can be found in Perron (1997).

²Popp (2008) and Costantini and Sen (2010) provided finite sample simulation evidence that highlights these two properties of Popp's unit root tests.