Convergence or non-convergence in output across countries

Cheung and Pascual (2004) Oxford Economic Papers
- it cannot be determined by statistical methods in common use.
- it depends on the null hypothesis of convergence or no convergence.

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The study of cross-country output dynamics from both viewpoints gives an equal opportunity for both convergence and no convergence to be validated by the data as the null hypothesis.

Our empirical results suggest that the inference about output convergence can be dictated by the choice of a null hypothesis. A conclusion of no output convergence can be reached just because no convergence is considered as the null hypothesis. Further, the no-convergence result reported in previous studies pursuing the time- series definition may be attributed to the low power of the test procedures being used. While short output data series or the use of univariate unit root procedures yields very limited support for the convergence hypothesis, the combination of long sample and efficient panel procedures delivers a more favorable result for the same hypothesis.
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