TESTING THE INCOME CONVERGENCE BETWEEN G20 COUNTRIES BY PANEL UNIT ROOT TEST
G20 ÜLKELERİ ARASINDA GELİR YAKINSAMASININ PANEL BİRİM KÖK TESTİ İLE SINANMASI

Author : Gökhan KONAT - Mehmet TEMİZ
Number of pages : 471-480

Abstract

The problem of uneven distribution of income among countries and country groups in the world is one of the main issues to be solved. As predicted in the neoclassical growth model; incomes of low-income countries converge over time to the income of high-income countries. Validity of this phenomenon called convergence hypothesis, gives an idea about how the income distribution problem is solved. By this study, the convergence hypothesis is analyzed by panel unit root test for G20 countries using per capita income data covering the years 1999-2018. The data used in the study are obtained from World Bank official statistics database. Firstly, it is examined whether there is a cross-sectional dependence in the series. CADF unit root test developed by Pesaran (2007) was applied to the series which have cross-sectional dependence. For the overall panel, the hypothesis that the series contains a unit root cannot be rejected. This result provides evidence that there is no convergence for G20 countries. According to individual test results, only for Canada, Indonesia and Mexico, the unit root hypothesis is rejected, meaning that the process is stable for these countries. In other words; supporting the general results, it is concluded that there is only convergence for 3 countries and there is no individual convergence for the other 17 countries.

Keywords

Income convergence, G20 countries, panel unit root analysis

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