Monetary Union and productivity differences in Mercosur countries

This paper investigates cross-country productivity convergence for the period 1960-1999. The testing strategy is based on a combination of tests and estimation methods. We use the de…nitions of time-series convergence by Bernard and Durlauf (1995), applying multivariate unit root tests, such as those proposed by Sarno and Taylor (1998). Moreover, in this same multivariate context, the Flôres et al. (1996) and Breuer et al. (1999) tests identify the countries that converge. Based on a sample of the 4 Mercosur countries plus associates (Chile and Bolivia) and Peru our results show evidence of convergence among the four Mercosur countries, both using Argentina and Brazil as benchmark countries. Moreover, some weaker evidence of convergence is also found with Bolivia. In contrast, convergence is rejected with Chile and Peru.