Volume 71, Issue 1 e12702
ORIGINAL ARTICLE

Assessing Income Convergence with a Long-run Forecasting Approach: Some New Results

Artur Silva Lopes

Corresponding Author

Artur Silva Lopes

Independent Researcher

Correspondence to: Artur Silva Lopes ([email protected]).

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First published: 10 July 2024
A preliminary and wrong version of this paper circulated with the title “Feels like going backwards: assessing income convergence with a long-run forecasting approach.” I must apologize the readers of that version because a seemingly minor (sign) error radically changed many statistical results.

I am grateful to Richard Startz for helpful comments. I am also grateful to Prasada Rao for helpful suggestions. Obviously, the usual disclaimer applies.

Abstract

Relying on low frequency econometric methods, a new simple procedure to assess international income convergence is introduced. It implements the long-run forecasting definition and discards short- and medium-term information contents of the data as these may produce misleading evidence. Robustness to non-stationarities is achieved using first differences of (logged) per capita incomes. Application to a selected sample of 90 different countries provides mixed but generally more positive evidence than most previous studies. Nevertheless, it casts many doubts on the inevitability of income convergence, at least in practically relevant time frames and as a worldwide phenomenon.

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