A Modern Framework to Study Convergence

Carlos Mendez-Guerra

Chapter Chapter 3 in Convergence Clubs in Labor Productivity and its Proximate Sources, 2020, pp 19-31 from Springer

Abstract: Abstract This chapter presents a modern methodological framework to study economic convergence across countries. It starts with a brief overview of the classical convergence framework and its limitations. Next, it presents a modern club convergence framework that encompasses key economic phenomena such as technological heterogeneity and multiple equilibria. Econometrically, this framework is based on a non-linear dynamic factor model that evaluates the hypothesis that all countries would eventually converge to a common steady-state growth path. If this hypothesis is rejected, then a clustering algorithm for panel data is applied to identify local convergence clubs. The chapter concludes with a selected overview of the club convergence literature and a tutorial on how to implement the club convergence framework in the statistical software Stata.

Keywords: Classical convergence; Club convergence; Technological heterogeneity; Multiple equilibria; Stata (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:spr:spbchp:978-981-15-8629-3_3

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DOI: 10.1007/978-981-15-8629-3_3

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