Structural Breaks and Convergence in the Regions of Peru: 1970-2010

The aim of this paper is the analysis of stochastic and β-convergence in the relative regional per capita outputs using different unit root tests both with and without structural breaks and using a further test that is robust to the presence of I(0) or I(1) errors. It allows robust inference on the estimates of the initial per capita output (intercepts) and the respective growth rates (slopes). The results of the application of unit root tests without structural breaks show the absence of stochastic convergence. However, by incorporating the presence of endogenous breaks, the results are reversed for all regions. In the case of β-convergence, the results of the robust test WRQF show that all regions have a structural break at some point during the period 1970-2010. We find different behavior for different regions. There is a catching-up process and a lagging-behind process for different groups of regions towards more negative or more positive paths.