THE CONVERGENCE HYPOTHESIS FOR OECD COUNTRIES RECONSIDERED: PANEL DATA EVIDENCE WITH MULTIPLE BREAKS, 1870-2003

In this paper we investigate the existence of stochastic convergence of per capita real output in 19 OECD countries over 1870-2003. For that purpose, we employ panel techniques which incorporate an unknown number of structural breaks along with cross-dependence. Overall, our analysis provides strong evidence of stochastic convergence over the 20th century. In addition, the examination of time-series &bgr;-convergence within the different regimes identified renders evidence supporting catching-up for 16 countries. This implies that, despite a narrowing of the income gap, the convergence process has yet to be completed. Evidence of long-run convergence is further provided for Finland, France and the USA. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.