Abstract

The main result of early neoclassical growth models supports the convergence of economic growth among countries. Given that countries converge to their steady state growth path, countries with lower economic growth will move faster than rich ones based on the neoclassical growth models. A tremendous amount of research studies have investigated the growth convergence among different regions and countries. Among others, Barro and Martin (1990) use a neo-classical growth model to find clear evidence of convergence among US states. However, many believe that since the infusion of knowledge appears with a time lag, it may take more than a century for countries to converge to the same economic growth path in a steady state.    In this study, we used fixed effect models to test the hypothesis of convergence among Middle East Countries for the period of 1995-2005. We tested for both absolute and conditional convergence using both GDP and per capita income. We also divided countries into two sub-groups, oil producing countries and non-oil producers, to see whether convergence exists within both group and whether the speed of convergence is different. Our results suggest that though there is a tendency of convergence among Middle East countries, the speed of convergence is different for oil producers compared with non-oil producers.  

Key words: Neo-classical growth model, steady state growth path, fixed effects model, absolute convergence, conditional convergence.