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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 03-20:
Regional income convergence in the Scandinavian countries

Jan Bentzen () and Valdemar Smith ()

Abstract: Using regional income data covering the time period since the early 1970s for all regions of

the Scandinavian countries the often addressed topic of income convergence is tested. The

empirical part of the paper applies different tests of convergence which are usually appearing

in connection with the question of convergence in relation to neoclassical growth models.

Following Sala-i-Martin the so-called beta-convergence test is applied but due to

methodological problems associated with this technique, alternative time series tests are also

considered. The newly introduced test by Nahar and Inder is applied to the income data,

where this methodology allows for a less restrictive interpretation of convergence in a time

series context compared to e.g. the Bernard-Durlauf unit root types of test. The time series

tests indicate that there is most support to the notion of absolute convergence in real incomes

among the regions of the Scandinavian countries in the sense that incomes converge towards

the region with the highest ‘leading’ income level (the 'leader').

Keywords: Scandinavian countries; Regional income; Convergence; (follow links to similar papers)

JEL-Codes: R11; (follow links to similar papers)

20 pages, January 28, 2003

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