TESTING THE CONVERGENCE HYPOTHESIS - A COMMENT

In a recent paper Lichtenberg (1994) proposes a test of the convergenc e hypothesis that the variance of productivity across countries decrea ses over time. He argues that the ratio of the variance in the first p eriod to that in the last period of the time series is F-distributed b ur overlooks the dependency between these two variances. As a conseque nce, probabilities of committing a type II error of incorrectly reject ing the convergence hypothesis are large. This problem manifests most strongly in short time periods. Lichtenberg, for example, rejects the convergence hypothesis for a data set of 22 OECD countries over the 19 60-1985 period. Using two alternative test statistics, we claim that t here is strong empirical evidence for convergence in that time period.