Income Convergence within MENA countries: a panel unit root approach
Résumé
This article aims at testing the convergence hypothesis in MENA region using new tests of a unit root in
panel data. Evans and Karras [Evans P., & Karras G. (1996). Convergence revisited. Journal of Monetary
Economics, 37, 249–265] and Bernard and Jones [Bernard A., & Jones C. I. (1996). Productivity across
industries and countries: Time series theory and evidence. The Review of Economics and Statistics, 135–146]
recommend this technique to evaluate the income convergence hypothesis. According to them it avoids
econometric problems of the cross-countries growth regressions testing convergence and sample bias of
the multivariate cointegration techniques. We test for both absolute and the conditional convergence with
panel unit root tests using the Summers and Heston's data 5.6 and 6.1 on the periods of 1960 to 1990 and
from 1960 to 2000. The absolute convergence hypothesis use panel unit roots test with no fixed individual
effects. The catching-up hypothesis is not rejected for most groups of countries of the region during both
periods. If we allow a break in the unit root tests, the hypothesis is not rejected for more groups. The
conditional convergence requires panel unit root tests with fixed individual effects. Again, during the whole
periods, the conditional convergence is not rejected for the major part of the remaining groups of MENA
countries.
panel data. Evans and Karras [Evans P., & Karras G. (1996). Convergence revisited. Journal of Monetary
Economics, 37, 249–265] and Bernard and Jones [Bernard A., & Jones C. I. (1996). Productivity across
industries and countries: Time series theory and evidence. The Review of Economics and Statistics, 135–146]
recommend this technique to evaluate the income convergence hypothesis. According to them it avoids
econometric problems of the cross-countries growth regressions testing convergence and sample bias of
the multivariate cointegration techniques. We test for both absolute and the conditional convergence with
panel unit root tests using the Summers and Heston's data 5.6 and 6.1 on the periods of 1960 to 1990 and
from 1960 to 2000. The absolute convergence hypothesis use panel unit roots test with no fixed individual
effects. The catching-up hypothesis is not rejected for most groups of countries of the region during both
periods. If we allow a break in the unit root tests, the hypothesis is not rejected for more groups. The
conditional convergence requires panel unit root tests with fixed individual effects. Again, during the whole
periods, the conditional convergence is not rejected for the major part of the remaining groups of MENA
countries.