Convergence Hypothesis: Evidence from Panel Unit Root Test with Spatial Dependence

Lezheng Liu () and Isabel Ruiz ()

Revista Ecos de Economía, 2006

Abstract: Abstract:In this paper we test the convergence hypothesis by using a revised 4- step procedure of panel unit root test suggested by Evans and Karras (1996). We use data on output for 24 OECD countries over 40 years long. Whether the convergence, if any, is conditional or absolute is also examined. According to a proposition by Baltagi, Bresson, and Pirotte (2005), we incorporate spatial autoregressive error into a fixedeffect panel model to account for not only the heterogeneous panel structure, but also spatial dependence, which might induce lower statistical power of conventional panel unit root test. Our empirical results indicate that output is converging among OECD countries. However, convergence is characterized as conditional. The results also report a relatively lower convergent speed compared to conventional panel studies.Resumen:En este documento probamos la hipotesis de convergencia usando un procedimiento revisado de cuatro pasos del test de raices unitarias de panel sugerido por Evans y Karras (1996). Usamos datos de la produccion de 24 paises de la OCDE para un periodo de 40 anos. Se examinara tambien si la convergencia es condicional o absoluta. De acuerdo con una proposicion de Baltagi, Bresson y Pirotte (2005), incorporamos el error espacial auto-regresivo en un modelo de panel de efectos fijos para estimar no solamente la estructura heterogenea de panel, sino tambien la dependencia espacial, la cual podria inducir un mas bajo poder estadístico del test convencional de raices unitarias. Nuestros resultados empiricos indican que la produccion es convergente entre los paises de la OCDE. Sin embargo, la convergencia es caracterizada como condicional. Los resultados tambien reportan una menor velocidad de convergencia, en terminos relativos, comparada con estudios convencionales de panel

Keywords: Convergence Hypothesis; Panel Unit Root Test; Spatial Dependence; Hipótesis de convergencia; Test de raíces unitarias de panel; Dependencia espacial (search for similar items in EconPapers)
JEL-codes: C21 C23 O40 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000442:010759

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