Why Should We Analyse Convergence Using the Distribution Dynamics Approach

Why Should We Analyse Convergence Using the Distribution Dynamics Approach? - Paper first received, September 2007; in final form, September 2008 The convergence hypothesis has stimulated heated debate within the growth literature. The present paper compares the two most commonly adopted empirical approaches the regression approach and the distribution dynamics approach and argues that the former fails to uncover important features of the dynamics that might characterise the convergence process. In particular, the empirical section highlights the interpretational advantages stemming from the use of stochastic kernels to capture the evolution of the entire cross-sectional income distribution. Incidentally, comparison between the results obtained from alternative sets of Italian regions suggests that the use of administrative regions may lead to ambiguous results. Keywords: Distribution Dynamics, Stochastic Kernel, -convergence, Regions JEL classification: C14; C20; O40; O52; R10