On the Power of Absolute Convergence Tests

Rómulo A. Chumacero
2006 Studies in Nonlinear Dynamics & Econometrics  
1 I would like to thank Rodrigo Fuentes, William Easterly, and Klaus Schmidt-Hebbel for helpful comments and suggestions. Francisco Gallego provided able research assistance. The usual disclaimer applies. Abstract This paper analyzes whether or not the econometric methods usually applied to test for absolute convergence have provided a "fair" chance to this hypothesis. We show that traditional (absolute and conditional) convergence tests are not consistent with even the simplest model that
more » ... d displays convergence. Furthermore, claims of divergence on the grounds of bimodalities in the distribution of per capita GDP can be made consistent with models in which neither divergence nor twin peaks are present in the long run.
doi:10.2202/1558-3708.1237 fatcat:dnixafgelfbi5dvtfuxsftktqu