Club convergence and clustering of U.S. energy-related CO2 emissions

This study examines the convergence of energy-related carbon dioxide emissions among a panel of U.S. states between the period 1960–2010. This examination is carried out by means of a two-stage procedure. In the first stage, we conduct an endogenous grouping, regression-based convergence test. Unlike previous studies, this methodology endogenously identifies groups of states with emissions that are converging to a similar steady state growth path over time. In the second stage, we evaluate the conditional rate of convergence for the whole sample and for each club using panel data, fixed effects models that control for unobserved, time-invariant heterogeneous effects. More specifically, we examine the rates of convergence conditional on certain structural and non-structural characteristics of the state economy. Results from stage one and stage two suggest that one group of twenty-six states is converging to a unique steady-state equilibrium, and otherwise, the remaining states are diverging. Finally, we discuss different policy approaches to mitigating carbon dioxide emissions based on the club convergence hypothesis.     

Testing convergence in economic growth for OECD countries

This article explores tests for absolute convergence in economic activity among a set of countries. It proposes a new test procedure that allows the researcher to identify particular countries within the group, which might not be converging. It also proposes that convergence among a set of similar countries is better thought of as movement toward a group leader, rather than movement towards a group mean. Applying the new procedure to 22 OECD countries it finds strong evidence for absolute convergence for the vast majority of countries towards their common steady state level. This article also points out why using standard unit root or cointegration tests with Bernard and Durlauf's definition of convergence is inappropriate.     

TESTING CONVERGENCE OF FIJI'S TOURISM MARKETS

Abstract.   The convergence hypothesis for tourism markets is based on the tenet that when tourism markets are converging the difference between total international visitor arrivals to a country and international visitor arrivals from a particular country will be stationary. We argue that if this is true, then convergence can also be tested through examining whether total visitor arrivals and visitor arrivals from a particular market are cointegrated. We test the convergence hypothesis by examining visitor arrivals to Fiji from eight tourist source markets, using both unit root and cointegration tests. We find strong statistical evidence that Fiji's tourism markets converge.     

Regional income inequality in China revisited: A perspective from club convergence

Growing income inequality in China has elicited considerable concern, and consensus has not been reached regarding whether regional income converges into one common steady state. The controversy may be attributed to the various definitions and methodologies for testing convergence. This study analyzes regional income inequality and convergence in China from the perspective of club convergence proposed by Phillips and Sul (2007). Instead of one convergence at the national level, we determine that provincial incomes are converging into two clubs: seven east-coastal provinces (Shanghai, Tianjin, Jiangsu, Zhejiang, Guangdong, Shandong, and Fujian) and Inner Mongolia are converging into a high income club, and the remaining provinces are converging into a low income club. In addition, we obtain strong evidence that income inequality within a club decreases, while that between clubs deteriorates over time. Between-club inequality is associated with investment in physical and human capital, as well as population growth rates.     

Meeting Maastricht: Nominal convergence of the new member states toward EMU

This paper estimates whether the new member states (NMS) that joined the EU in 2004 have achieved a form of inflation and long-term interest rate convergence. Using quarterly data from the mid-1990s, convergence is evaluated through a series of unit root and cointegration tests. Both univariate and panel tests are performed, including tests for a large number of combinations of inflation and interest rates satisfying the Maastricht inflation and long-term interest rate criteria. It is generally found that nominal convergence in inflation has been attained among the NMS. There is, however, less evidence of convergence in long-term interest rates. Possible exceptions include Estonia and the Czech Republic and, to a lesser extent, Slovakia which has since joined the euro area. There is also a large degree of consistency between the various unit root and cointegration tests in both the univariate and panel variations.     

Heterogeneous technology and the technological catching-up hypothesis: Theory and assessment in the case of MENA countries

Long run convergence implies that the convergence hypothesis will be rejected if the income differential is not stationary. However, this definition is valid only if the catching-up process between the two countries is already over. If we take into account catching-up dynamics, then poorest countries should obtain a faster growth than developed countries. Thus, income gaps should integrate decreasing time trends. We formalise this hypothesis theoretically using a stochastic neoclassical growth model with heterogeneous technology. We then apply this model to the issue of per-capita GDP catching-up of eight MENA countries towards the level of income in Europe. We approximate the nonlinear deterministic trend by a linear function with breaks and apply panel unit root tests with breaks. The analysis reveals firstly that the periods of divergence outnumber the periods of convergence. Secondly, since the year 2000 all countries but Syria have been converging toward the European per-capita income level.     

Is income converging in China?

This study adopts a flexible Fourier unit‐root test proposed by Enders and Lee (2012) to revisit the tendency towards convergence in real per capita income among provinces after economic reform in China. When a data‐generating process is non‐linear, a Fourier series not only allows for the possibility of an unknown number of structural breaks with unknown forms but also allows for the use of a low‐frequency component to capture multiple changes. Contrary to what the linear statistics suggest, our results from a flexible unit‐root test indicate that China's eastern and western regions are converging to their own specific steady states.     

Productivity Convergence in European Manufacturing

The paper empirically investigates international productivity convergence in the manufacturing sector, which was found not converging in earlier studies. The authors analyze subsectors of aggregate manufacturing in order to compare similar technologies and to avoid the mixing of converging and nonconverging subsectors in the aggregate. Some of the subsectors converge while others, as well as aggregate manufacturing, do not. There is stronger evidence of convergence in subsectors with a smaller number of different industries. The latter serves as a proxy for the variety of technologies. Overall, the results highlight the importance of comparing similar technologies when studying productivity convergence.     

HAS EUROPEAN ECONOMIC INTEGRATION AFFECTED THE FUNCTIONAL COMPOSITION OF GOVERNMENT EXPENDITURES?

Globalization and growth-maximizing governments may cause countries to converge toward a similar composition of government expenditures. These convergent forces may be even more intensive in the case of EU member states engaged in the European integration process. The results obtained, through calculation of a constructed dissimilarity index and by adapting the usual indicators of convergence (β, σ, and γ), reveal that there has been a harmonization process. In addition, this approximation of the structures of government expenditures has been greater in the EU than in the non-EU countries of the OECD. Nevertheless, EU member states are converging toward a different steady-state composition of government expenditures. (JEL H11, H50, H60 )     

Productivity and convergence across U.S. States and industries

We examine the sources of aggregate labor productivity movements and convergence in the U.S. states from 1963 to 1989. Productivity levels vary widely across sectors and across states, as do sectoral output and employment shares. The main finding is the diverse performance of sectors regarding convergence. Using both cross-section and time series methods, we find convergence in labor productivity for both manufacturing and mining. However, we find that convergence does not hold for all sectors over the period. Decomposing aggregate convergence into industry productivity gains and changing sectoral shares of output, we find the manufacturing sector to be responsible for the bulk of cross-state convergence.     

Regional convergence of growth,inequality and poverty in India—An empirical study

The paper attempts to examine whether there is regional convergence of per capita consumption, inequality and poverty across various states in India. Using panel unit root tests that are robust to cross-sectional dependence, we find that inequality and poverty indicators converge at both rural and urban levels. Further, per capita consumption converges at urban level but not at rural level. Based on factor analysis, we find two groups of states for rural sectors, viz., low-growth and high-growth states, for each of which per capita consumption converges. We also attempt at identifying the responsible entities — central or state governments or both in cases where convergence is not achieved.     

Re-examination of convergence hypothesis among Indian states in panel stationarity testing framework with structural breaks

This article examines the conditional income convergence hypothesis for 17 major states in India for the period of 1960–2012. Univariate stationarity tests without structural breaks provide evidence against the convergence hypothesis. However, when two or more structural breaks are applied in per capita income series, the incomes of around 11–13 states are found to stochastically converge to the national average. This finding supports the convergence hypothesis for the panel as a whole after accounting for two data features, cross-sectional dependence and structural breaks in incomes, using a unified panel stationarity testing framework.     

Are state–local government expenditures converging? New evidence based on sequential unit root tests

Large and persistent gaps in subnational public expenditure have important implications regarding growth, equity, and migration. In this context, we revisit the question of expenditure convergence across the American states to provide more nuanced evidence than found by a small number of previous studies. We employ a methodology due to Smeekes (Bootstrap sequential tests to determine the stationary units in a panel, 2011) that sequentially tests for unit roots in pairwise (real per capita) expenditure gaps based on user specified fractions. In a panel of 48 combined state–local government units (1957–2008), we found that expenditures on highways, sanitation, utility, and education were far more convergent than expenditures on health and hospitals, police and fire protection, and public welfare. There was little evidence of “club convergence” based on the proportion of intraregional convergent pairs. Several historically high-grant receiving states showed relatively strong evidence of convergence. Our results bode well for future output convergence and opportunities for Tiebout-type migration across jurisdictions. They also imply a diminished role for public infrastructure and education spending in business location choices over time and a mixed role for federal grants in inducing convergence.     

Outside the Club: New Zealand's economic growth, 1870-1993

Recent tests of the Convergence Hypothesis, or the tendency for per capita income levels to narrow over time, have included a time-series testing approach (see Bernard & Durlauf, 1995, 1996; Oxley & Greasley, 1995, Greasley & Oxley, 1997, 1998a). Results have been mixed, with Bernard & Durlauf finding no evidence of convergence whereas Oxley & Greasley find evidence of two small convergence clubs. This paper adds to the debate by considering a newly created annual per capita income series for New Zealand, 1870-1993. The results show that the series is integrated of order 1, I(1), and neither a single break nor joint breaks overturn the null of a unit root. Combined with results from Greasley & Oxley (1998a, 1998b), this property of New Zealand data is incompatible with her belonging to a UK/Australia convergence club, or converging towards either of the North American economies. New Zealand per capita income growth is idiosyncratic, diverging below the growth rates of traditional trading partners. A conjunction of small size and insular economic policies distinguishes New Zealand's economic development.     

Stochastic Divergence or Convergence of Per Capita Carbon Dioxide Emissions: Re-examining the Evidence

This paper revisits the time-series literature on the convergence of per capita carbon dioxide (CO₂) emissions and examines the robustness of previous results. Using a sample of OECD countries for the period 1950–2002 we employ a battery of stationarity and unit root tests including those that allow for cross-sectional dependencies within the panel. We also correct for inaccuracies in previous studies that could result in a trend-stationary series being labelled as converging even if it were actually diverging from the international average. The body of evidence provided by our analysis suggests that per capita CO₂ emissions have not converged among OECD countries during the period under consideration. This finding is of importance to both climate change policy makers and to those who construct climate change models.      

Convergence in Income Inequality: Further Evidence from the Club Clustering Methodology across States in the U.S.

This paper contributes to the sparse literature on inequality convergence by empirically testing convergence across states in the U.S. This sample period encompasses a series of different periods that the existing literature discusses -- the Great Depression (1929–1944), the Great Compression (1945–1979), the Great Divergence (1980-present), the Great Moderation (1982–2007), and the Great Recession (2007–2009). This paper implements the relatively new method of panel convergence testing, recommended by Phillips and Sul (2007). This method examines the club convergence hypothesis, which argues that certain countries, states, sectors, or regions belong to a club that moves from disequilibrium positions to their club-specific steady-state positions. We find strong support for convergence through the late 1970s and early 1980s, and then evidence of divergence. The divergence, however, moves the dispersion of inequality measures across states only a fraction of the way back to their levels in the early part of the twentieth century.     

Variational convergence: Approximation and existence of equilibria in discontinuous games

We introduce a notion of variational convergence for sequences of games and we show that the Nash equilibrium map is upper semi-continuous with respect to variationally converging sequences. We then show that for a game G with discontinuous payoff, some of the most important existence results of Dasgupta and Maskin, Simon, and Reny are based on constructing approximating sequences of games that variationally converge to G. In fact, this notion of convergence will help simplify these results and make their proofs more transparent. Finally, we use our notion of convergence to establish the existence of a Nash equilibrium for Bertrand-Edgeworth games with very general forms of tie-breaking and residual demand rules.     

Convergence in income inequality? evidence from panel unit root tests with structural breaks

This paper empirically tests whether there is evidence of convergence in income inequality, as predicted by several versions of the neoclassical growth model, using a large panel of annual data for the 48 contiguous states in the US over the 1916?C2005 period. By implementing the panel LM unit root test developed by Im et?al. (Oxford Bull Econ Stat 67:393?C419, 2005, Panel LM unit-root tests with trend shifts, Mimeo, 2010) that allows for the presence of structural breaks and heterogeneity in the panel, we find overwhelming evidence in support of convergence in income inequality. In addition, the results are robust to alternative inequality indicators used, different notions of stochastic convergence defined, and additional cross-sectional correlation considered.     

Inequality convergence

Evidence is found that within-country income inequalities have been slowly converging since the 1980s; inequality is tending to fall (rise) in countries with initially high (low) inequality. Correcting for classical measurement error in the initial inequality measures has little affect on the speed of convergence.     

Credible redistributive policies and migration across U.S. states

We ask whether worker mobility has undermined the ability of U.S. states to redistribute income. We build a tractable model where both migration decisions and redistribution policies are jointly determined. Our model features a large number of heterogeneous regions and skilled and unskilled workers with idiosyncratic migration costs. The calibrated model is able to account for the main features of interstate migration, as well as some qualitative features of the cross-sectional distribution of redistributive policies. We conduct a counterfactual experiment in order to isolate the effect of worker mobility on state-level redistributive policies. We find that migration has induced substantial convergence in tax rates across U.S. states, but no race to the bottom. Interestingly, the degree of convergence has been much lower for transfers due to an offsetting tax-base effect.