Time Series Tests of Income Convergence with Two Structural Breaks: An Update and Extension

John W. Dawson () and Mark Strazicich ()

No 06-01, Working Papers from Department of Economics, Appalachian State University

Abstract: This paper uses newly available long-span data on real per capita incomes from 1900-2001 to test for stochastic convergence in a diverse group of 29 countries. To perform our tests, we utilize the two-break LM unit root test of Lee and Strazicich (2003) and endogenously determine two distinct structural breaks in level and trend for each country. Despite including both OECD and non-OECD countries, we find significant evidence that incomes are stochastically converging. World War II is the most often identified time period of breaks. The results represent slightly more evidence in favor of convergence than reported in the study by Dawson and Sen (forthcoming) using the same sample of countries.

New Economics Papers: this item is included in nep-ets
Date: Written 2006
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