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.