Are income differences within the OECD diminishing? Evidence from Fourier unit root tests

King Alan () and Ramlogan-Dobson Carlyn
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King Alan: Department of Economics, University of Otago, New Zealand
Ramlogan-Dobson Carlyn: University of Hull, Hull Business School, Hull, UK

Studies in Nonlinear Dynamics & Econometrics, 2014, vol. 18, issue 2, 185-199

Abstract: We investigate the income convergence hypothesis for 24 OECD countries using Fourier-type unit root tests that can account for structural breaks of unknown number, timing and functional form in a series’ data generating process. Our results indicate that all 24 countries have followed a nonlinear underlying growth path (relative to the US) over the post-war era. These growth paths indicate that as many as half of the countries sampled are systematically catching-up with the US. Only a handful show evidence of being in relative decline, but the fact that this group includes several G7 economies is of concern.

Keywords: Fourier function; income convergence; nonlinear mean-reversion; nonlinear trend (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1515/snde-2013-0008

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