Is there club convergence in Latin America?

Previous studies of the income convergence hypothesis for Latin American economies indicate that almost all are not systematically closing their income gap with developed nations. The few studies to consider whether they instead exhibit club convergence—i.e., convergence to a steady-state equilibrium significantly inferior to that of the developed economies—offer little convincing evidence of this either. We argue that this reflects the limitations of their measure of relative income (which includes their sample’s average income) and/or the assumptions underlying the discrete-break unit-root tests they employ. By avoiding these limitations, we obtain evidence of two Latin American convergence clubs.