Closer together or further apart? Club convergence in the Organization of Islamic Cooperation (OIC) countries

Abstract

Purpose This paper aims to examine the per capita income convergence of 57 member countries of the Organization of Islamic Cooperation (OIC) over the period 1990–2017 and to investigate the determinants of convergence club formations. Design/methodology/approach The authors applied the methodology of Phillips and Sul (2007, 2009) to identify the convergence clubs and estimated several-ordered logit models to determine the key drivers. Findings The results support existence of two convergence clubs and one diverging unit, indicating that 30 and 26 member countries form two separate groups converging to their own steady-state paths. They also suggest a significant productivity divergence between these clubs. The authors showed that the number of convergence clubs started to decline after the global financial crisis in 2008. Moreover, they found that fixed capital formation, education and political stability are key drivers of convergence club membership. Practical implications There is a strong need for large-scale policy interventions to close the gap between leading and lagging clubs of the OIC. A substantial investment in human and physical capital seems necessary for lower-income OIC countries. Originality/value This is the first empirical study on the existence of convergence clubs among member countries of the OIC.

A review of Phillips‐Sul approach‐based club convergence tests

“…The effects of using this new procedure were observed by Mazzola and Pizzuto (2020) and Gunduz et al. (2021). In contrast, a non‐significant impact of the von Lyncker and Thoennessen (2017) approach was found by Alexiadis et al.…”

“…Examining the convergence of gross value added (GVA) per capita at the NUTS-2 level, von Lyncker and Thoennessen (2017) noted that their procedure reduces the number of convergence clubs as well as divergence units compared to the PS approach. The effects of using this new procedure were observed by Mazzola and Pizzuto (2020) and Gunduz et al (2021). In contrast, a non-significant impact of the von Lyncker and Thoennessen (2017) approach was found by Alexiadis et al (2021) and Nghiem et al (2021), which may have been due to the use of narrow samples in their study.…”