Growth Convergence Across Countries and Regions in the Long Run: An Empirical Study Using Panel Analysis (1980-2018)

With the emergence of new superpowers, the changing landscape of the global economy, and the heterogeneity of growth experiences being discovered in recent times, the concept of growth convergence must be revisited. This study examines whether developing countries are catching up with the advanced countries in terms of their per capita income. The study uses a panel analysis of 69 countries over a period of 39 years spanning from 1980 to 2018 to test for growth convergence (both absolute and conditional) among countries based on the Augmented Solow model. The countries were further divided into three regions namely, Europe, Asia, and Sub-Saharan Africa. The results show no evidence of absolute convergence indicating a lack of progress in closing the income gap between the developed and developing countries. However, there is strong evidence of the presence of conditional convergence across countries and within regions after controlling for investment, population growth, and human capital. This suggests that countries with similar characteristics tend to converge in per capita income in the long run. As a result, poor countries can be made to converge to prosperity if they could adopt or attain the socio-economic structures and productivity levels in rich countries. The results also show that macroeconomic variables increase the rate of convergence in growth rates of income.