Absolute beta convergence in liberated communist countries of Europe

Abstract

It was not possible to test the neoclassical convergence theory on communist countries until the collapse of communism. The method of beta convergence indicates divergence among the liberated countries of Southeast Europe from 1980-2006. A more advanced quantile regression also indicates divergence of growth rates among these countries. However, when the study period is divided into communist period, transition period, and democracy era some evidence of convergence during democratic period becomes evident. This supports the neoclassical growth theory, which indicates poorer countries grow much faster than richer nations resulting in smaller gap among them.