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Robust Tests for Convergence Clubs

Luisa Corrado (), Thanasis Stengos (), Melvyn Weeks () and Ege Yazgan ()
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Melvyn Weeks: University of Cambridge

No 451, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: In many applications common in testing for convergence the number of cross-sectional units is large and the number of time periods are few. In these situations asymptotic tests based on an omnibus null hypothesis are characterised by a number of problems. In this paper we propose a multiple pairwise comparisons method based on an a recursive bootstrap to test for convergence with no prior information on the composition of convergence clubs. Monte Carlo simulations suggest that our bootstrap-based test performs well to correctly identify convergence clubs when compared with other similar tests that rely on asymptotic arguments. Across a potentially large number of regions, using both cross-country and regional data for the European Union we find that the size distortion which afflicts standard tests and results in a bias towards finding less convergence, is ameliorated when we utilise our bootstrap test.

Keywords: Multivariate stationarity; bootstrap tests; regional convergence. (search for similar items in EconPapers)
JEL-codes: C51 R11 R15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo
Date: 2019-02-14, Revised 2019-02-14
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Related works:
Working Paper: Robust Tests for Convergence Clubs (2018) Downloads
Working Paper: Robust Tests for Convergence Clubs (2018) Downloads
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