The Influence of Temporal Choice, Correlation, and Sample Size on Income Convergence

Beta-convergence is determined by the sign of the slope of the income growth line. The conclusion of significance, hence convergence or divergence, is affected by the temporal choice. Changes in the starting and ending periods influence the conclusion of convergence, lack of significance, or divergence. The customary t-test for significance of slope is influenced by correlation between the base year and the growth rate over the period of study as well as the sample size. To separate the two contributing factors, the t-test is formulated as a function of the correlation coefficient.