Testing and measurement of economic convergence: A review of some recent developments

Abstract

Objective: This article reviews the empirical findings about the convergence hypothesis obtained in the period 1992-2017. In the first place it investigates the specifications of economic indicators used in testing the convergence effect. Further, the paper provides a breakdown of the convergence research development after the financial crisis. Research Design & Methods: The research method is based on critical literature review. Hence, this article builds on other author’s surveys, summarizes them and concludes the development. Findings: No trend in analysed literature has been seen. The convergence debate is still not settled. With respect to the financial crisis, many authors describe it as having positive effect on convergence. However despite inserting dummy data or splitting the analysis for the pre- and post-crisis periods, no method to deal with the slowdown was noted. Contribution & Value Added: Providing the empirical results in one place, this review is for sure a good starting point for people interested in the convergence process. Also some more experienced researchers may find, that the debate is still not settled and the topic is worth further investigation.

Keywords

• literature review, economic growth, financial crisis, beta and sigma convergence, convergence debate