@techreport{Pesaran2004pair,
abstract = {This paper proposes a pair-wise approach to testing for output convergence that considers all
N(N-1)/2 possible pairs of log per capita output gaps across N economies. A general
probabilistic definition of output convergence is also proposed, which suggests that all such
output gap pairs must be stationary with a constant mean. The approach is compatible with
individual output series having unit roots, does not involve the choice of a reference country
in computation of output gaps, and can be applied when N is large relative to T (the time
dimension of the panel). The proposed test is applied to output series in the Penn World
Tables over 1950-2000, as well as to Maddion's historical series over 1870-2000. Overall, the
results do not support output convergence, and suggest that the findings of convergence clubs
in the literature might be spurious. However, significant evidence of growth convergence is
found, a result which is reasonably robust to the choice of the sample period and country
groupings. Non-convergence of log per capita outputs combined with growth convergence
suggests that while common technological progress seems to have been diffusing reasonably
widely across economies, there are nevertheless important country-specific factors (for
example, wars, famines, revolutions, regime and institutional changes) that render output gaps
highly persistent, such that we can not be sure that the probability for the output gaps to lie
within a fixed range will be non-zero.},
address = {Munich},
author = {Mohammad Hashem Pesaran},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {C32; C33; D90; O47; 330; economic growth; panel data models; common technological shocks; convergence; Entwicklungskonvergenz; Sozialprodukt; Panel; Vergleich; Welt},
language = {eng},
number = {1308},
publisher = {Center for Economic Studies and Ifo Institute (CESifo)},
title = {A pair-wise approach to testing for output and growth convergence},
type = {CESifo Working Paper},
url = {http://hdl.handle.net/10419/18673},
year = {2004}
}