Measuring regional per capita income convergence in the East African Community

Abstract

The increasing diversity of average growth rates and income levels across countries has generated a large literature on testing the income convergence hypothesis. Some of the countries in East Africa have experienced economic growth, with the pace of growth having varied substantially across countries. Recent empirical studies have found evidence of several convergence clubs, in which per capita incomes have converged for selected groupings of countries.

This paper investigates per capita GDP convergence among the EAC countries during the period 1990-2009. In the empirical analysis of the convergence processes we use the neo-classical approach. The paper concludes that the region experienced some level of absolute convergence of per capita GDP during the period. When national effects were included into convergence equations, there was also some level of conditional convergence albeit at relatively lower rate of less than 2%. The results of the analysis therefore imply that there is need for policies to be put in place to speed up and sustain the rate of regional income convergence in the EAC region.