An examination of convergence hypothesis for EU-15 countries

- Nonlinear, nonlinear-asymmetric and LM unit root tests are employed.
- 5 countries exhibit long-run or deterministic convergence with the EU-15 average.
- 9 out of 15 countries exhibit stochastic convergence with the EU-15 average.
- 2 stochastically converging countries exhibit divergence in last periods.
- Overall, 11 EU countries converge towards the EU-15 average.

In this paper we investigate whether EU-15 countries experience convergence in per capita GDP levels with respect to the EU-15 average over the period 1950-2015. Nonlinear and nonlinear-asymmetric unit root tests as well as structural break Lagrange Multiplier (LM) unit root tests are employed. When nonlinear and nonlinear-asymmetric unit root tests are employed, five countries exhibit long-run or deterministic convergence with the EU-15 average. However, when endogenous structural break LM unit root tests are employed, nine countries exhibit stochastic convergence. Test results indicate that real per capita income levels of 11 EU countries converge towards the EU-15 average.