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Time Series Tests of Income Convergence with Two Structural Breaks: An Update and Extension

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  • John W. Dawson
  • Mark C. Strazicich

Abstract

This paper uses newly available long-span data on real per capita incomes from 1900-2001 to test for stochastic convergence in a diverse group of 29 countries. To perform our tests, we utilize the two-break LM unit root test of Lee and Strazicich (2003) and endogenously determine two distinct structural breaks in level and trend for each country. Despite including both OECD and non-OECD countries, we find significant evidence that incomes are stochastically converging. World War II is the most often identified time period of breaks. The results represent slightly more evidence in favor of convergence than reported in the study by Dawson and Sen (forthcoming) using the same sample of countries.

Suggested Citation

  • John W. Dawson & Mark C. Strazicich, 2006. "Time Series Tests of Income Convergence with Two Structural Breaks: An Update and Extension," Working Papers 06-01, Department of Economics, Appalachian State University.
    • Handle: RePEc:apl:wpaper:06-01
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    References listed on IDEAS

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    1. Datta, Anusua, 2003. "Time-series tests of convergence and transitional dynamics," Economics Letters, Elsevier, vol. 81(2), pages 233-240, November.
    2. Andy Neumeyer & Hugo Hopenhayn, 2004. "Latin America in the Twentieth Century: Stagnation, then Collapse," Econometric Society 2004 Latin American Meetings 326, Econometric Society.
    3. repec:bla:obuest:v:63:y:2001:i:5:p:535-58 is not listed on IDEAS
    4. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
    5. Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
    6. Strazicich, Mark C. & Lee, Junsoo & Day, Edward, 2004. "Are incomes converging among OECD countries? Time series evidence with two structural breaks," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 131-145, March.
    7. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    8. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
    9. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    10. Nunes, Luis C & Newbold, Paul & Kuan, Chung-Ming, 1997. "Testing for Unit Roots with Breaks: Evidence on the Great Crash and the Unit Root Hypothesis Reconsidered," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 435-448, November.
    11. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-2132, December.
    12. Junsoo Lee & Mark C. Strazicich, 2001. "Break Point Estimation and Spurious Rejections With Endogenous Unit Root Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(5), pages 535-558, December.
    13. Li, Qing & Papell, David, 1999. "Convergence of international output Time series evidence for 16 OECD countries," International Review of Economics & Finance, Elsevier, vol. 8(3), pages 267-280, September.
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    3. Ayala, Astrid & Blazsek, Szabolcs, 2013. "Structural breaks in public finances in Central and Eastern European countries," Economic Systems, Elsevier, vol. 37(1), pages 45-60.

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