CONVERGENCE OF ECONOMIC GROWTH AND INEQUALITY BETWEEN CENTRAL AMERICAN COUNTRIES (1962-2012)

The growth convergence hypothesis of the per capita Gross Domestic Product (GDP) in Central American countries during the 1962 - 2012 period is discussed in this paper. It was determined that the rate of convergence between the Central American countries is slow (beta = -0.09597) and tends to decrease with time. In addition, evidence suggests that convergence is in different steady states and is strong in the GDP growth rate. The paper also analyzes the relationship between economic growth and income inequality (Gini Index) and determines the existence of a tradeoff between growth and inequality.