Scandinavian Working Papers in Economics

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

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

Jan Bentzen () and Valdemar Smith ()
Additional contact information
Jan Bentzen: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Valdemar Smith: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

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

JEL-codes: R11

20 pages, January 28, 2003

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