Testing convergence in economic growth for OECD countries

Abstract

This article explores tests for absolute convergence in economic activity among a set of countries. It proposes a new test procedure that allows the researcher to identify particular countries within the group, which might not be converging. It also proposes that convergence among a set of similar countries is better thought of as movement toward a group leader, rather than movement towards a group mean. Applying the new procedure to 22 OECD countries it finds strong evidence for absolute convergence for the vast majority of countries towards their common steady state level. This article also points out why using standard unit root or cointegration tests with Bernard and Durlauf's definition of convergence is inappropriate.