Convergence in the OECD: Transitional Dynamics or Narrowing Steady-State Differences? |
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Authors: | Javier André s,José E. Boscá ,Rafael Domé nech |
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Affiliation: | Andrés:;Departmento de Análisis Económico, Universidad de Valencia, Avda. de los Naranjos s/n, 46022-Valencia, Spain. Phone +34963828246, Fax +34963828249, E-mail Boscá:;Departmento de Análisis Económico, Universidad de Valencia, Avda. de los Naranjos s/n, 46022-Valencia, Spain. Phone +34963828246, Fax +34963828249, E-mail Doménech:;Departmento de Análisis Económico, Universidad de Valencia, Avda. de los Naranjos s/n, 46022-Valencia, Spain. Phone +34963828246, Fax +34963828249, E-mail |
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Abstract: | In this article we show that the picture emerging from models that allow for generalized parameter heterogeneity in convergence equations changes our view of the convergence process within the OECD. Estimation methods that allow for non- or partial heterogeneity stress the importance of transitional dynamics. Thus the observed reduction in the dispersion of per capita income is mostly explained by transitional dynamics. When generalized parameter heterogeneity is allowed for, we find that the observed narrowing of incomes has little bearing on transitional dynamics. Convergence in this case happens because the long-run features of these countries are becoming increasingly similar. |
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