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Empirical Evidence on Convergence Across Brazilian States

Luiz Lima (), Hilton Hostalácio Notini and Fábio Gomes

Revista Brasileira de Economia - RBE, 2010, vol. 64, issue 2

Abstract: This paper is aimed to analyze the convergence hypothesis across Brazilian States in a 60 year period (1947-2006). In order to test the existence of income convergence, the order of integration of the income differences between each State and São Paulo is examined. São Paulo is the richest State and for this reason is used as a benchmark. First of all, we employed the conventional unit root tests, finding evidence against the convergence hypothesis. However, given the lack of power of unit root tests, especially when the convergence is very low, we used ARFIMA models, which is also theoretically more appropriate [Michelacci and Zaffaroni (2000)]. Even so, the findings of the ARFIMA models cast doubts on the convergence hypothesis

Date: 2010
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Handle: RePEc:fgv:epgrbe:v:64:y:2010:i:2:a:1481