Long-Run Convergence Trends in the Association of Southeast Asian Nations

Abstract

This paper examines income convergence among the ten-member Association of Southeast Asian Nations (ASEAN) for the period 1970–2019, spanning the establishment of the ASEAN Economic Community (AEC) in 2015. We employ the novel log t test developed by Phillips and Sul which is robust to heterogeneity and nonlinearity in the data. Our study uniquely analyses convergence using both per capita income and national GDP aggregates. We find evidence of an ongoing process of convergence in GDP per capita among ASEAN members, with convergence rates ranging from 0.003% to 0.22% annually. However, our analysis of national GDP aggregates reveals potential divergence and the emergence of a ‘two-tier ASEAN’. We attribute the slow convergence to insufficient capital accumulation and technological progress across member states. Our findings highlight the complex dynamics of economic integration in ASEAN and underscore the need for targeted policies to promote inclusive growth and prevent the formation of a two-tier economic structure within the bloc. This research contributes to the literature on regional economic integration and provides valuable insights for policymakers in ASEAN and other regional economic communities.