New Evidence on the Convergence of International Income from a Group of 29 Countries

This paper updates and extends the time-series evidence on the convergence of international incomes using a set of 29 countries over the period 1900-2001. Time-series tests for stochastic convergence are supplemented with tests which provide evidence on the notion of “$-convergence” predicted by the Solow model. The evidence indicates that the relative income series of 21 countries are consistent with stochastic convergence, and that $-convergence has occurred in at least 16 countries at some point during the 20 century. Further examination of the properties of the $-convergence test provides anecdotal evidence of conditional convergence in three additional countries for which the convergence hypothesis was initially rejected. Consideration of convergence clubs strengthens the evidence in favor of convergence. Analysis of the cross-country dispersion of incomes over time also suggests that convergence has occurred over the 1900-2001 period, particularly within certain clubs, with structural breaks associated with World War II in many countries causing a break in the convergence process.