What is Gross Capital Formation

Empirical evidences on convergence or divergence of a group of economies or regions in most instances are based upon per capita income as the only determinant for discussion. As time goes on, there has been a lot of studies on the convergence or divergence of certain variables which are proxy to the income variable. The present chapter attempts to examine whether there is convergence or divergence in per capita gross capital formation across 37 countries for the period 1980-2013. The study observes that there is significant absolute ß and s convergence for the cross section of all the economies for the entire period. By segregating the entire data into the categories of developed and developing country, the study further observes significant s convergence in both the cases with no absolute ß convergence in either of the country categories.