Convergence in TFP among Italian Regions - Panel Unit Roots with Heterogeneity and Cross Sectional Dependence

and that there are convergence clubs present. We cannot reject the null of no
stationarity only for the Northern regions and, consequently, we have to con-
clude that among these regions does not exist any process of convergence.
When we look at y, a tendency of club convergence is shown only for the
first level of geographical disaggregation (South and Centre-North). Inter-
estingly, when we consider the disaggregation into three groups of regions
(South, Centre and North), we find that only the Southern regions seem to
exhibit the tendency of club convergence. An odd result is that the test
rejects the null hypothesis when we pool the Centre-Nothern regions, but
fails to reject the null when we further disaggregate the sample into Central
and Northern regions. In both cases, there seems to be no convergence. A
plausible explanation for this result is that there must be some form of in-
terdependence within the more general grouping and this causes some form
of convergence between part of the regions. This is absent when we look at
the two sub-groups. Ultimately, this seems to suggest that further analysis
of the clubs of convergence may be important in order to get a richer picture.

5 Concluding Remarks

In this paper, we have intended to look for evidence of convergence in the long
run structural determinants of growth using a measure of Total Factor Pro-
ductivity derived from the growth accounting methodology. Past evidence
on convergence in per capita income and labour productivity in Italy has
underlined a substantial dualism between Northern and Southern regions.
This is a well known result, but what happens within these two areas? Are
the geographically near regions so similar in the economic structure and do
they grow really along a same long run path? Taking into account the het-
erogeneity and the cross-sectional dependence, we have investigated more in
depth on the presence of similarity in the TFP growth process of the Italian
regions. Moreover, we have used two different measures of distance from the

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