Trade Liberalisation and Income Convergence

This paper analyses the effect of liberalisation on per capita income convergence between countries. The 1980s and 1990s saw many developing countries open up their economies. Some of these economies continued to lag behind; however, most of them saw rapid growth post liberalisation. To identify the effect of trade on convergence rates, a single difference approach is followed, comparing convergence patterns pre- and post-liberalisation. The convergence measure is estimated between a set of developing countries and their most active trading partners. The results do not reflect any significant change in the rates of convergence for the developing countries pre- and post-liberalisation.