Income Convergence in Developing Countries

Emmanuel Anoruo () and Ferdinand Nwafor

The Icfai Journal of Applied Economics, 2007, vol. VI, issue 6, pages 69-76

Abstract: This paper investigates income convergence in 20 developing countries, including Algeria, Benin, Burkina Faso, Cameroon, Chad, Cote d'Ivoire, Gabon, Gambia, Indonesia, Malaysia, Mali, Morocco, Mozambique, Niger, Nigeria, Pakistan, Senegal, Togo, Turkey, and Uganda. This paper applies a battery of tests including the modified Dickey-Fuller, the Phillips-Perron, and the two-break minimum LM unit root procedures. The results suggest that the per capita income of each of the sample countries is stationary and therefore, mean-reverting. Most importantly, these results provide evidence in support of income convergence among the sample countries. Two important findings emerge from the study. First, contrary to the earlier studies on this issue, the present study finds evidence in support of income convergence among the sample developing countries. Second, the inability of most of the previous studies to find evidence in support of income convergence, especially among developing countries, can be attributed to their inability to account for structural breaks in the data.

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