Income convergence in latin america in a smooth transition autoregressive framework: evidence from brazil, mexico, chile and costa rica

Ahmet Ozyigit

Economics Bulletin, 2009, vol. 29, issue 4, A30

Abstract: This study investigates the income convergence hypothesis between Mexico, Brazil, Chile and Costa Rica using a unit root test developed by Kapetanios, Shin and Snell (2003) (KSS) which tests the joint null hypothesis of linearity and a unit root against a nonlinear stationary process. In a Smooth Transition Autoregressive (STAR) framework, this study shows that the income gaps of Brazil, Chile and Costa Rica with respect to Mexico are nonlinear but stationary with significant trend effect, implying the Latin countries have not achieved a long-run steady state with respect to income convergence, but rather, are catching up with Mexico.

Keywords: Income convergence; non-linear income gap; non-linear stationary test; KSS test; Long-run steady state convergence; catching-up; Latin American income gap (search for similar items in EconPapers)
JEL-codes: C1 C3 (search for similar items in EconPapers)
Date: 2009-12-18
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-09-00789

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