Testing Convergence in Economic Growth for OECD Countries.

In this paper we propose a new test procedure with more general steady state information to test the convergence hypothesis for a specific economy. We consider a model where demeaned per capita output of an economy is a function of time trend and then set the convergence hypothesis as negative average slope of that model. Applying the new procedure to 22 OECD countries we find strong evidence of convergence for 20 countries towards their average level. This study also points out why using standard unit root tests with Bernard and Durlauf's (1995) definition of convergence is inappropriate.