NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Interpreting Tests of the Convergence Hypothesis

Andrew B. Bernard, Steven N. Durlauf

NBER Technical Working Paper No. 159
Issued in June 1994
NBER Program(s):   EFG

This paper provides a framework for understanding the cross- section and time series approaches which have been used to test the convergence hypothesis. First, we present two definitions of convergence which capture the implications of the neoclassical growth model for the relationship between current and future cross-country output differences. Second, we identify how the cross-section and time series approaches relate to these definitions. Cross-section tests are shown to be associated with a weaker notion of convergence than time series tests. Third, we show how these alternative approaches make different assumptions on whether the data are well characterized by a limiting distribution. As a result, the choice of an appropriate testing framework is shown to depend on both the specific null and alternative hypotheses under consideration as well as on the initial conditions characterizing the data being studied.

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Document Object Identifier (DOI): 10.3386/t0159

Published: Bernard, Andrew B. and Steven N. Durlauf. "Interpreting Tests Of The Convergence Hypothesis," Journal of Econometrics, 1996, v71(1&2,Mar/Apr), 161-173.

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