New Evidence on the Convergence of International Income from a Group of 29 Countries

Abstract

This paper updates and extends the time-series evidence on the convergence of international incomes using a set of 29 countries over the period 1900-2001. Time-series tests for stochastic convergence are supplemented with tests which provide evidence on the notion of "Beta-convergence" predicted by the Solow model. The evidence indicates that the relative income series of 21 countries are consistent with stochastic convergence, and that Beta-convergence has occurred in at least 17 countries at some point over the 1900-2001 period. Further examination of the properties of the Beta- convergence test provides anecdotal evidence of conditional convergence during the post-war period in seven countries for which the convergence hypothesis was initially rejected. Analysis of the cross-country dispersion of incomes over time also suggests that convergence has occurred over the 1900-2001 period, with structural breaks associated with World War II in many countries causing a break in the convergence process.