Sigma Convergence Research Articles

Labour and the ‘law of one price’: regional wage convergence of farm workers in Sweden, 1757–1980

ABSTRACT Economic theory predicts that differences in wages for workers with similar skills will decline as labour mobility increase. This prediction is reminiscent of the ‘law of one price’, the notion that markets, if unfettered, eliminates price differentials of similar commodities across space. But can we really apply the economic logic of the commodity market to the labour market, governed as it is by institutions and politics as well as market forces? In this paper, we have examined the spread in farm workers’ wages across Swedish counties in 1757–1980. Besides nominal wages, the paper also offers cost of living indices by county. The paper enquires into sigma convergence and beta convergence. Long-run convergence, by both measures, was massive; the coefficient of variation, for instance, declined from about 28 per cent in the mid-eighteenth century to 4 per cent in 1980. Most of the compression, though, occurred in brief episodes rather than continuously. Markets, through labour mobility and trade, and institutions, through collective actions and labour laws, took turns in pushing towards regional convergence. The ‘law of one price’, we conclude, was not singlehandedly responsible for the elimination of regional wage differentials.

Mortality convergence in the enlarged European Union: a systematic literature review.

BackgroundThe high mortality rates in the European Union (EU) Member States that acceded in 2004 sparked political interest in mortality convergence. Whether mortality is converging in the EU remains unclear. We reviewed the literature on mortality convergence in the post-2004 EU territory as a whole. We also explored whether the study designs influenced the results and whether any determinants of mortality convergence had been empirically examined.MethodsA systematic literature review was performed. Our search included scientific databases and the websites of international governmental institutions and European demographic research institutes.ResultsWe uncovered 94 unique records and included seven studies that reported on 36 analyses. There was marked methodological heterogeneity, including in the convergence measures (beta and sigma convergence). All of the beta convergence analyses found narrowing mortality differentials, whereas most of the sigma convergence analyses found widening mortality differentials. The results are robust to the units of analysis and mortality and dispersion measures. Our results also suggest that there is a lack of evidence on the determinants of mortality convergence in the EU.ConclusionsThere is general agreement that the EU regions and the Member States with high initial mortality rates improved the fastest, but this trend did not lead to overall mortality convergence in the EU. The harmonization of mortality convergence measures and research into determinants of mortality convergence are needed to support future EU cohesion policy. Policy-makers should consider supporting areas that have moderate but stagnant mortality rates, in addition to those with high mortality rates.

A sector-level analysis of output club convergence in case of a global economy

PurposeThis paper investigates the per-capita output club convergence in case of 120 countries for the period 1995–2015. Further, we disaggregate per-capita output into three broad sectors such as agriculture, industry, and service and investigate the convergence hypothesis.Design/methodology/approachThe paper tests this hypothesis using the Phillips and Sul panel club convergence technique.FindingsOur findings are as follows: (1) our results indicate the evidence of output divergence for the full sample; (2) when countries are divided into different clubs, the results exhibit the sign of per capita output club convergence both for aggregate and three major sectors. Further, this study confirms that industry's per capita output is the main driver for aggregate per-capita output club convergence in case of club 1. For club 2, agriculture's per capita output is a primary source for aggregate per capita output club convergence. Likewise, in the case of clubs 3 and 4, we find the service sector's per capita output is the main component for aggregate per-capita output club convergence; (3) both the service and industry sectors are major drivers for aggregate per-capita output club convergence.Practical implicationsThis study suggests to the policymaker that sector-specific policies need to be adopted to boost the per-capita output growth by improving the performance of each of the sectors across the countries.Originality/valueNotwithstanding, there are many studies that examine the output convergence using a notion of beta and sigma convergence, but studies regarding per capita output club convergence both at the aggregate and sectoral level are scanty.

Evolution of Carbon Shadow Prices in China’s Industrial Sector during 2003–2017: A By-Production Approach

Global warming and the rapid growth of carbon emissions have attracted the attention of governments and academia throughout the world. In 2006, China surpassed the United States as the emitter of the greatest volume of carbon, the largest contribution of which is derived from China’s industrial sector. This study investigated the evolution of industrial carbon shadow prices (CSPs) in China at the provincial level to assess the opportunity costs in terms of value added foregone owing to decreasing carbon emissions. A dual formulation of the by-production data envelopment analysis (DEA) model was applied to estimate the industrial carbon abatement costs in China during 2003–2017. This study represents the first attempt to apply the dual by-production DEA model for this purpose. Empirical results showed that industrial CSP increased by 3.83% annually and that the average provincial CSP was approximately $562.43 USD/ton. A significant upturn in the CSP occurred after 2006. Furthermore, disparities of changes in industrial CSP over time were checked using the test of sigma convergence. Regional divergence was observed for the period 2011–2017. Policy implications were derived from the empirical results in terms of improvements regarding carbon abatement.

Energy Efficiency in OECD and non-OECD Countries: Estimates and Convergence

Energy efficiency is essential for reducing energy consumption, increasing energy security, and reducing CO2 emissions. This paper uses stochastic frontier analysis applied to a large panel data set of 81 OECD and non-OECD countries covering the years 1980 to 2013 to estimate energy efficiency. Average energy efficiency by country group increased between 1980 and 1999 before levelling out. Recently, however, energy efficiency has declined. On average, 13% of global energy consumption can be saved by reducing transient inefficiencies. Sigma convergence is investigated. There is not much evidence to support energy efficiency sigma convergence (a reduction in the dispersion of energy efficiency across countries). Sigma divergence and energy efficiency reductions make it more difficult to negotiate international treaties on energy efficiency and climate change. Lastly, echoing previous work, we find that energy intensity is a poor proxy for energy efficiency.

Examining Anti-Corruption Disclosures, Profitability and Financial Stability Among Extractive Firms in Africa

This study examines the determinants of anti-corruption disclosures and the effect of disclosures on the profitability and financial stability of extractive firms in Africa. The study also tests the presence of convergence in anti-corruption disclosure, profitability, and financial stability of the firms. The study uses an unbalanced panel data of 27 firms operating in 5 African countries covering the period 2006 to 2018. The data was collected from different corporate reports of the firms that form part of the Global Reporting Initiative (GRI) database. The study uses a composite index to measure overall disclosure and individual items are coded as binary. Profitability is measured using the return on asset and return on equity while the z-score measures financial stability. The study uses panel logistic regression for binary dependent variables and panel corrected standard error regression/random effect regression for continuous variables. The results indicate that the determinants of anti-corruption disclosure are: membership in the United Nations Global Compact (UNGC) and Extractive Industry Transparency Initiative, multinational enterprise status, corruption perception index, and human development index. Specifically, UNGC membership and multinational status enhance the disclosure on corruption analysis while countries with a high prevalence of corruption have firms that report more on corruption analysis. Disclosure on corruption training is high among firms that are UNGC signatories, countries with a high human development index, and countries with a high prevalence of corruption. There is a weak effect of firm-level, industry-level, and country-level factors on disclosures on corruption response. There is evidence that corruption disclosure reduces the financial stability of firms. Disclosures on corruption analysis and corruption training are the main factors driving the reduction in financial stability. The effect on profitability is not significant except in the case of disclosure on corruption response which also reduces profitability. There is strong statistical evidence to suggest that anti-corruption disclosure, profitability, and financial stability of extractive firms converge. The study has relevant implications for practitioners, policymakers, and the academic community. It is very beneficial to the GRI Secretariat and other sustainability standard setters. The study uses data that is skewed towards large extractive firms. This study is premier in exploring the nexus between anti-corruption disclosure, profitability, and financial stability in extractive firms in Africa. It is also unique in providing a test of both beta and sigma convergence among the firms.

R&D expenditure in the EU: convergence or divergence?

This article examines the convergence of the R&D expenditure in the EU28 for 2004–2015. We initially run a sigma convergence analysis and the results show convergence in the total expenditure, due to the behaviour of the business and higher education sectors, despite government sector divergence. However, noticeable differences between the EU15 and 13 EU countries are apparent. The business enterprise sector is the main driver of EU15 R&D convergence, whereas for the EU13 this role is played by the government expenditure. In addition, the economic crisis has impacted differently on both groups. The club convergence approach allows us to explore these insights through individualized analysis and clusterization. Results for the EU28 show two clubs for the total expenditure, but the analysis of its components reveals a larger grouping. Our results evidence the necessity of revising the EU R&D policies towards greater coordination and resources, and the implementation of new instruments, due to the impact of this expenditure on growth, development and integration.

Convergence trends of environmental taxation in European countries

The aim of the paper is to analyse peculiarities of building an environmental tax systems, examining the level of their convergent (divergent) relationships. Main contribution of the paper lies in testing of the hypothesis of existing convergence processes in architecture of environmental tax systems of European countries (as the United Kingdom, Germany, Poland, Slovenia, Latvia, Lithuania and the Czech Republic) on the basis of panel data analysis for the set of European countries using the regression model in Stata 12/SE and MS Excel. Testing the hypothesis about the existence of convergence in construction of environmental tax system of the above mentioned European countries was realized on the base of analysis of coefficients of panel data regression analysis (both fixed effects and random effects models) – for beta convergence and variation coefficient – for sigma convergence. Such parameters as environmental tax revenue (for air pollution) to general tax revenues ratio, %; environmental tax revenue (for water pollution) to general tax revenues ratio, %; environmental tax revenue (for waste management) to general tax revenues ratio, % were chosen as measures of environmental tax system characteristics. Empirical research results confirmed hypothesis of the presence of β-convergence and σ-convergence in the context environmental tax systems of chosen countries.

Sigma Convergence and VECM Approach in Explaining the Relationship among Macro Variables in Indonesia

Objective – Inequality of regional income, government expenditure and government revenue can show the performance of these variables in improving the economic and non-economic conditions of each region. Previous literature discusses, in part, the inequality among these three variables. This research fills the gap left by previous research by analyzing the inequality of the three variables and analysing the relationship between them in driving the provincial economy in Kalimantan. The first objective of this study is to analyze the reduction of regional income inequality, government revenue and government expenditure. The second objective is to analyze the relationship among macro variables. Methodology/Technique – Using data from 4 provinces in Kalimantan across a 15-year period (2002-2016), this study concludes that in the short term, only changes of government revenue have an impact on regional income and only changes of government revenue has an impact on government expenditure. Findings - Meanwhile, in the long term, changes in regional income, government revenue, and government expenditure can all have an impact on regional income. Type of Paper: Empirical. Keywords: Inequality; Regional Income; Government Expenditure; Government Revenue. Reference to this paper should be made as follows: Kurniawati, S; Lestari, N. 2019. Sigma Convergence and VECM Approach in Explaining the Relationship among Macro Variables in Indonesia, J. Bus. Econ. Review 4(4) 156 – 162 https://doi.org/10.35609/jber.2019.4.4(2) JEL Classification: H70, E00, E10, O11.

Convergence of retail banking interest rates to households in euro area: time-varying measurement and determinants

This study measures time-varying progress of retail banking (to households) interest rates convergence and examines its determinants for twelve countries of the euro area, between 2003 and 2014. First, we measure convergence of interest rates using five different time-varying indicators, namely asymmetric dynamic conditional correlation (ADCC), beta convergence, sigma convergence, variance ratio, and dynamic cointegration. We then estimate panel regressions for each type of interest rate to identify the determinants of convergence over pre-crisis and crisis periods. The estimated ADCC is employed as the dependent variable and explanatory variables measure potential macroeconomic, external linkages, industry-specific, institutional and sociological determinants. The results reveal that convergence is weak and heterogeneous across sub-periods (pre-crisis and crisis), economic groups (core and periphery), product type (savings and credit) and products’ maturities (short, medium and long). Among the fundamental determinants, inflation, output correlation, and sociological factors strongly impact convergence, however, the explanatory power of determinants weakens during the crisis period.

REAT: A Regional Economic Analysis Toolbox for R

Methods of regional economic analysis are widely used in regional and urban economics as well as in economic geography. This paper introduces the REAT (Regional Economic Analysis Toolbox) package for the programming environment R, which provides a collection of mathematical regional analysis methods in a user-friendly way. The focus is on the identification of regional inequality, beta and sigma convergence, measurement of agglomerations, point-based measures of clustering and accessibility as well as regional growth. The theoretical basics of the applications are briefly introduced, while the usage of the most important functions is presented and explained using real data.

DO PRICES CONVERGE AMONG INDONESIAN CITIES? AN EMPIRICAL ANALYSIS

We investigate consumer price convergence for 82 Indonesian cities using monthly data from 2014 to 2019. To do so, we employ recent techniques of club convergence and weak sigma convergence. The results reveal, first, consumer price divergence, implying price rigidities across the cities. Second, we find four clubs, suggesting that Indonesian cities converge along four unique transition paths. Third, we find weak evidence of consumer price convergence, suggesting that prices among Indonesian cities adjust, but not freely. Policy should therefore consider unique convergence paths for each club to promote stronger consumer price convergence.

REGIONAL INCOME AND ITS CONVERGENCE IN INDONESIA

This study aims to calculate and analyze whether or not a decline occurs in regional income inequality (sigma convergence). Additionally, it attempts to examine the ability of low-income provinces to catch up the provinces with a high regional income, neither controlled nor (absolute convergence and conditional convergence). Finally, the study calculates the speed and time needed to catch up to half of the lags. The first objective of thestudy was answered by using the coefficient of variation. The second objective was answered by the First Difference GMM (FD GMM) method, and the third objective was answered by using a formula for calculating the convergence speed expressed by Feldkircher (2006), and the half convergence formula from Barro & Sala-i-Martin (1995). This research figured out that sigma convergence occurreds after divergence. The research also reported no convergence of regional income beta, in both absolute and conditional convergences. Finally, the time needed to catch up the half of the lags in non-conditional beta convergence was shorter than conditional beta convergence.

SOCIAL CONVERGENCE IN THE EU-28 COUNTRIES IN THE LIGHT OF THE IMPLEMENTATION OF THE EUROPE 2020 STRATEGY. THE DEA APPROACH

Increase in convergence of the European Union countries has been focal for the European Union leaders, from the very beginning. The aim of the study is to examine whether any social convergence occurred in the EU-28 from 2010 to 2016, in the context of the implementation of the recommendations and the social policy objectives formulated under the Europe 2020 strategy. This article is based on an overview of the literature on the subject and the statistics of Eurostat. The methods of assessing the effectiveness of objects is DEA and sigma convergence. It is a new approach to convergence measurement based on the assessment of the efficiency diversification of the European Union countries and it has clearly been the value added to the analyses conducted so far. The obtained results in the scope of the estimation of the effectiveness were then compared to the existing results produced with the use of the methods generally recognized and employed in the literature. Conclusions were presented in the final part of the study.

Lack of Global Convergence and the Formation of Multiple Welfare Clubs across Countries: An Unsupervised Machine Learning Approach

The cross-country convergence hypothesis is one of the central topics of long-run macroeconomics. This paper revisits this hypothesis in a context beyond GDP. It uses a novel welfare index that incorporates measures of consumption, leisure, life expectancy, and inequality. Based on a sample of 128 countries over the 1980–2007 period, the lack of global sigma and beta convergence is first documented. Next, the paper incorporates some recent developments from the unsupervised machine learning literature to evaluate the existence of local convergence. In particular, the application of a distribution-based clustering algorithm suggests the formation of three local convergence clubs. Under this classification, beta convergence is recovered for each club. However, only the core members of the richest club appear to be reducing their welfare differences in a way that is consistent with the strong notion of sigma convergence. Overall, these results re-emphasize the finding that beta convergence is necessary, but not sufficient for sigma convergence, even within convergence clubs and in a context beyond GDP.

Industrial Productivity Divergence and Input-Output Network Structures: Evidence from Japan 1973–2012

Since the early 1990s, there have been larger and increasing labor productivity differences across industries in Japan. More specifically, a clear pattern of sigma and beta divergence across industries is observed. To shed light on these stylized facts, we first evaluate the input–output structure of Japan through the lens of a community-detection algorithm from network theory. Results from this analysis suggest the existence of two input–output network structures: a densely-connected group of industries (a stationary community), whose members remain in it throughout the period; and a group of industries (a transitional community) whose members do not belong to this first group. Next, we re-evaluate the industrial divergence pattern of Japan in the context of each network structure. Results suggest that divergence is mostly driven by the transitional community. Interestingly, since 2007, a pattern of sigma convergence started to re-appear only in the stationary community. We conclude suggesting that industrial divergence and instability in community membership are not necessarily indicative of low productivity performance.

BRICS Nations and Income Convergence: An Insight from the Quarterly Data for 2006Q1–2017Q2

The formation of the BRICS Group was aimed at, among others, developing parallel economic power house of the highly emerging nations and generating additional shock absorbing capacity. Maintaining equitable distribution of income and wealth among the group members, thus, was one of the top most priorities of the group. Under this backdrop, the present study examines whether the countries are converging in income leading to overall development in the group. Applying the neoclassical growth and panel unit roots models on the quarterly data from 2006Q1–2017Q2 to 2009Q1–2017Q2, the study reveals that there is no significant catching up of the countries in both the periods, but there is conditional convergence in the first period. The variables which played conditional roles are net FDI inflow and crude oil production. Further, the study observes sigma convergence among the group members in both the periods, signifying that the cross-country income differences have been going down over time.

Regional Economic Convergence and Spatial Spillovers in Turkey

Using sigma and beta convergence methods, this study tests economic convergence in Turkish NUTS-2 regions between 2004-2011. The findings of sigma convergence show that, in accordance with the literature, the interregional income gap decreases during economic recession periods and increases during economic expansion periods. The beta convergence results obtained by the cross-sectional and panel estimations indicate the existence of absolute convergence. In addition, spatial data analysis and beta convergence analysis provide strong evidence for the existence of spatial autocorrelation in regional income distribution and show that the spatial dimension should be taken into account in convergence analyses.

Konwergencja typu sigma cen gruntów rolnych w państwach Unii Europejskiej

W artykule poruszono problematykę zależności pomiędzy cenami ziemi rolniczej w państwach Unii Europejskiej. Celem artykułu jest próba uzyskania odpowiedzi na pytanie czy ma miejsce zmniejszanie się zróżnicowania poziomu cen gruntów rolnych w krajach Unii Europejskiej. Analizie poddano ceny gruntów rolnych w wybranych państwach UE w latach 2006 – 2016. Badaniu poddano występowanie konwergencji w trzech wymiarach: w całej Unii Europejskiej, pomiędzy państwami tzw. starej Unii oraz pomiędzy tzw. nowymi krajami UE. W wyniku przeprowadzonych analiz potwierdzono występowanie zjawiska sigma-konwergencji cen gruntów rolnych w całej UE. Stwierdzono również, że w tzw. nowych państwach UE oraz pomiędzy państwami należącymi do tzw. starych państw UE nie zachodzi zjawisko sigma-konwergencji cen gruntów rolnych.

EFFICIENCY AND INCREASING PRODUCTIVITY OF THE MANUFACTURING INDUSTRY OF EAST JAVA PROVINCE

This study aims to analyze technical efficiency and to find out the main contributors to the productivity of the manufacturing industry in East Java, which increased in 2007-2015. On the other hand, this research also aims to determine the direction of the efficiency of the manufacturing industry sub-sector and the factors that influence the level of efficiency of the manufacturing industry. The level of efficiency that approaches the frontier signifies convergence, while divergence indicates that the level of efficiency that has not approached the frontier. There are 24 manufacturing industry sectors that were observed in this study. To calculate the value of technical efficiency, this study uses Data Envelopment Analysis (DEA) with a bootstrapping approach with 2000 times the number of iterations. While the calculation of productivity changes in this study uses the Malmquist Index. Conditional beta convergence analysis (β), sigma convergence (σ), gamma convergence (γ), and stochastic convergence is used to analyze efficiency convergence. The results of the score of technical efficiency analysis show that the manufacturing industry in East Java is still in an inefficient condition with the electrical equipment industry being the highest efficiency score sector, while the furniture industry is the most inefficient sector. Technological progress at 54 percent each year is a major contributor to the increase in manufacturing industry productivity by 55 percent during 2007-2015. On the other hand, the results of testing four convergence models show different results, sigma, gamma, and stochastic convergence indicating the convergence of manufacturing industry efficiency, while conditional beta convergence testing shows an indication of the divergence in manufacturing industry efficiency. The GMM estimation results show that factors that significantly affect the efficiency of manufacturing industries are energy intensity, capital-labor ratio, capital intensity, and industrial share.
 JEL: D24, L60