INCOME CONVERGENCE BETWEEN COUNTRIES: ESTIMATION OF BETA CONVERGENCE BY DYNAMIC PANEL DATA METHOD

Abstract

Analysis of inequality in income distribution among countries require a detailed examination of the processes of economic growth and convergence. Knowing how the convergence process will work provides insight into the course of the income distribution. In this context, the theoretical and empirical analyses of the convergence hypothesis remain important and up-to-date in the literature. In this study, it is aimed to obtain findings on Beta income convergence between countries by using panel approach. For this purpose, conditional convergence hypothesis has been tested for 31 countries whose data can be reached in the period covering 1999-2013. The analysis focuses on the speed of convergence as well as the presence of convergence. In this analysis using panel data, GMM estimation method was used since it is thought to be the most suitable method for estimating growth regressions. In this context, findings have been reached to support the hypothesis of weak convergence for countries within the sample. On the other hand, openness, investment, and total factor productivity contributed positively to economic growth. Convergence rates, which can be considered as low when compared with the results in the literature, have been reported increasing in direct proportion with the depth of time dimension of the relationship examined.