Income Convergence toward USA: New Evidences for Latin and South American Countries

Abstract In this paper we test two versions of convergence hypothesis namely deterministic or conditional convergence and stochastic or catching up hypothesis using Carrion-i-Silvestre et al. (۲۰۰۵) stationary test. The results show Latin and South American countries (LSA) catching up process toward the USA failed in ۱۹۸۰s and somewhat in ۱۹۹۰s. But in ۲۰۰۰s most of them could lie in convergence path. Dispersion of break dates show that structural breaks in LSA convergence were affected by trade policies, terms of trade shocks and also war. For example, terms of trade shocks due to volatility of primary goods prices such as sugar, copper, cotton, petroleum oil, coffee, bauxite, aluminum, and rice affected the convergence process in LSA countries.

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Keywords: Income Convergence ، Catching up ، Stationary Test ، Structural Breaks ، Latin and South America. JEL Classification: O۴۱ ، C۳۲