RELATIVE INCOME AND INVESTMENT COMPARISONS AMONG OECD NATIONS

Cross-section and time series studies of convergence genera;ly have le d to opposite conclusions about the convergence hypothesis. The method ologies employed in these studies suffer certain conceptual or statist ical weaknesses. In this study, an entirely different approach is take n. The analytics of convergence is modeled using differential equation s and the necessary and sufficient condition for absolute (steady stat e) convergence is derived. While our results reject absolute convergen ce for the OECD nations in a differential equation-time only model and in a differential equation model with capital accumulation and time a s arguments, we find evidence of relative convergence with a weaker di fferential equation model. (C) 1998 Elsevier Science Inc.