Is There Cross-Country Income Convergence Among the BRICS Nations? An Examination

Abstract

Narrowing the developmental gaps of a relatively poor country with a relatively rich one is one of the priorities to the policymakers of the former. One way to reduce the developmental gaps is making different countries in a group to converge to a single steady-state value. Under this background, this study aims to examine whether the BRICS nations are converging in per capita GDP for the period 1990–2016. Applying the neoclassical methodology of β convergence and σ convergence, the study observes that the countries are not unconditionally β converging but converging in conditional terms with the variables such as foreign direct investment (FDI) flow and working population acting as the deciding factor. Furthermore, the study shows that the countries are converging in σ definition meaning the cross-country dispersion in per capita gross domestic product (GDP) has fallen significantly. Hence, formation of BRICS has made the countries relatively better off compared to pre-BRICS phase.JEL Classification: E01, O4, J21