Growth Paths in Saarc: Testing the Convergence Hypothesis From a Divergence Lens

Convergence hypothesis holds importance to analyze economic growth. This paper attempts to investigate convergence hypothesis for selected SAARC countries including Bangladesh, India, Pakistan and Sri Lanka. Both the hypothesis of absolute and conditional convergences are tested by applying pooled least square with time dummies and cross-section weights methodology for a data set from 1980 to 2016 which is taken from World Development Indicator and International Financial Statistics. The results conclude absence of both the absolute convergence and conditional convergence for these selected SAARC countries. Conditional convergence hypothesis is tested again with the inclusion of control variables consisting of population growth, inflation rate, unemployment rate, exports growth and openness and it again suggests absence of conditional convergence for these SAARC countries. Disparity level for each country is also calculated with reference to average steady state income level and all SAARC countries are found to be below than the average steady state level.