Convergence of EU Countries: SURADF and SURKSS Unit Root Test
Gökhan Konat, Mustafa Gökçe, Fatma KızılkayaThe basis of the convergence hypothesis is based on Solow (1956). According to this hypothesis within the neo-classical growth theory approaches, the income of the less developed countries will reach the level of developed countries after a while. The hypothesis of convergence of incomes of underdeveloped countries to incomes of developed countries is a hypothesis frequently tested in the literature. Most of the current growth models are the Solow model, directly or indirectly. Although it is a simple model, the Solow model has many advantages. Moreover, most of the growth models are, directly or indirectly, based on the Solow model. In this study, the convergence of annual income series of the EU member countries, covering the period of 1960-2018, was examined. In this study, the stochastic convergence hypothesis, one of the convergence types, was tested with panel unit root tests based on SUR models. The SURADF and SURKSS panel unit root tests are second generation panel unit root tests. The SURADF and SURKSS panel unit root tests take into account the cross-sectional dependency, and allow for an explanation of each unit separately. In this study, it was concluded that EU member countries converged to the EU’s group average.
AB Ülkelerinin Yakınsaması: Suradf ve Surkss Birim Kök Test
Gökhan Konat, Mustafa Gökçe, Fatma KızılkayaYakınsama hipotezinin temeli Solow (1956)’a dayanmaktadır. Neo klasik büyüme teorisi yaklaşımları içerisinde yer alan bu hipoteze göre az gelişmiş ülkelerin gelirleri, bir süre sonra gelişmiş ülkelerin seviyesine ulaşacaktır. Az gelişmiş ülkelerin gelirlerinin, gelişmiş ülkelerin gelirlerine yakınsaması hipotezi literatürde sıklıkla sınanan bir hipotezdir. Günümüzdeki büyüme modellerinin çoğu doğrudan ya da dolaylı olarak Solow modelidir. Her ne kadar basit bir model olsa da, Solow modelinin birçok avantajı vardır. Ayrıca büyüme modellerinin çoğu doğrudan ya da dolaylı olarak Solow modeline dayanmaktadır. Literatürde sınanan birden fazla yakınsama türü vardır. Başlangıçta yakınsama yatay kesit regresyon analizine dayalı olarak test edilmiştir. Bu yöntemin eksiklikleri zaman serisi tekniğini temel alan analizlere yöneltmiştir. Yakınsama hipotezinin farklı türleri ekonometrik olarak sınanabilmektedir. Çalışmada AB üyesi ülkelerin 1960-2018 dönemini kapsayan yıllık gelir serilerinin yakınsaması incelenmiştir. Bu çalışmada yakınsama türlerinden biri olan stokastik yakınsama hipotezi SUR modellerine dayanan panel birim kök testleri ile sınanmıştır. Bu panel birim kök testleri yatay kesit bağımlılığını dikkate alan ve panelin her birimi için ayrı ayrı yorum yapılmasına imkân veren ikinci nesil panel birim kök testleridir. Bu çalışmada AB üyesi ülkelerin AB’nin grup ortalamasına yakınsadığı sonucuna ulaşılmıştır.
As a result of the convergence hypothesis that the growth rates of developing and underdeveloped countries will be higher than those of developed countries, underdeveloped and developing countries will catch up with developed countries. In other words, the real gross domestic product of all countries will be equalized after a certain period of time. This idea is basically based on the law of decreasing yields. As a result of the capital increase of developed countries, which have reached the saturation point in terms of capital, the output increase rate is below the output increase rate as a result of the capital increase of underdeveloped and developing countries, which are insufficient in terms of capital. The basis of the convergence hypothesis is based on Solow (1956). Until Solow’s work, an acceptable theoretical explanation could not be given to this phenomenon, which was voiced by many theorists prior to Solow. The basis of the convergence hypothesis is based on Solow (1956). Moreover, most of the growth models are directly or indirectly based on the Solow model. There are multiple types of convergence tested in the literature. Earlier models did not distinguish between old and new technology, and looked at both old and new technology with one vision. The introduction of technological progress means that there is a difference in the efficiency of old and new technology. Thus, the model means that only physical capital accumulation cannot bring about growth per capita or increase the amount of production. In particular, given a microeconomic specification of technologies and preferences, the per capita output in an economy will approach the same level, regardless of initial capital (Timakova, 2011). When comparing different economies, it means that for economies with the same technologies and preferences, the difference in production per capita will be temporary.
The Solow growth model is the first to present convergence. It has deeply influenced the way economists conceptualize long-term relationships between macroeconomics. According to this hypothesis within the neo-classical growth theory approaches, the income of the less developed countries will reach the level of developed countries after a while. That is, the exact definition of convergence is to achieve the same fixed income level. Convergence hypothesis studies generally use external theory (Rivas ve Villarroya, 2017). Because the concept of convergence emerged, if different countries have the same preferences and technology, it can be said that the poorer countries tend to grow faster than the rich countries, especially in the presence of accumulated factors, particularly the decrease in marginal returns in capital use. Each country will reach its own stable state, but the differences in the per capita income will be reduced. When the rich and poor countries reach the same fixed income level, another possible solution can be seen. The hypothesis of convergence of incomes of underdeveloped countries to incomes of developed countries is a hypothesis frequently tested in the literature. Different types of convergence hypothesis can be tested in terms of econometrics. In this study, the convergence of annual income series of the EU member countries, covering the period of 1960-2018, was examined and the stochastic convergence hypothesis, one of the convergence types, was tested with panel unit root tests based on SUR models. The ADF and KSS panel unit root tests based on SUR models. The ADF and KSS panel unit root tests are second generation panel unit root tests. The ADF and KSS panel unit root tests take into account the cross-sectional dependency and allow for an explanation of each unit separately. In this study, using SURADF and SURKSS unit root tests, the convergence status of the EU member countries to the group average of the EU was examined, and results were given about whether the convergence hypothesis is valid for each country separately.
