Sigma-Convergence in the OECD: Transitional Dynamics or Narrowing Steady State Differences?

13 Pages Posted: 14 Mar 2002

See all articles by Javier Andrés

Javier Andrés

University of Valencia - Department of Economics

José Emilio Boscá Mares

University of Valencia - Department of Economic Analysis

Rafael Doménech

University of Valencia - Department of Economic Analysis

Date Written: December 2001

Abstract

The empirical literature of growth has steadly improved the econometric methods used mainly to address the effect of cross-country heterogeneity in the estimated convergence rate. In this paper, we highlight an important implication of this process of econometric refinement that has so far received little attention. We show that the picture that emerges from models that allow for generalised heterogeneity changes our view of the process of convergence within the OECD. Estimation methods that allow for non or partial heterogeneity stress the importance of transitional dynamics in the process of convergence. Thus sigma-convergence is mostly accounted for by beta-convergence. On the contrary, when generalised parameter heterogeneity is (tested and) allowed for we find that the observed reduction in the dispersion of per capita income within the OECD has little bearing on transitional dynamics. sigma-convergence in this case happens because the long run features of these countries are becoming increasingly similar (convergence in steady states). There are also striking differences across estimated models as regards the evolution of the relative position of the average country with respect to its steady state income per capita level.

Keywords: Convergence, parameter heterogeneity, panel data

JEL Classification: C13, C23, O41, O57

Suggested Citation

Andrés, Javier and Boscá Mares, José Emilio and Doménech, Rafael, Sigma-Convergence in the OECD: Transitional Dynamics or Narrowing Steady State Differences? (December 2001). Available at SSRN: https://ssrn.com/abstract=303139 or http://dx.doi.org/10.2139/ssrn.303139

Javier Andrés

University of Valencia - Department of Economics ( email )

E-46022 Valencia, Valencia E-46022
Spain
(34 96) 382 8260 (Phone)
(34 96) 382 8249 (Fax)

José Emilio Boscá Mares (Contact Author)

University of Valencia - Department of Economic Analysis ( email )

Campus de los Naranjos
46022 Valencia
Spain

Rafael Doménech

University of Valencia - Department of Economic Analysis ( email )

Campus de los Naranjos
46022 Valencia
Spain
+96 382 8210 (Phone)
+96 382 8249 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
177
Abstract Views
1,871
rank
229,650
PlumX Metrics