PPP Income Convergence in Asia: Evidence from ASEAN-10 and Selected Asian Comparators, 1995–2019

Abstract

This study examines whether ASEAN economies exhibit real income catch-up when benchmarked against a wider Asian reference space using purchasing power parity (PPP)–adjusted GDP per capita. Using World Development Indicators data for 23 Asian economies—including ASEAN-10, Timor-Leste, and selected East and South Asian comparators—convergence is assessed through complementary lenses: β-convergence (growth dynamics) and σ-convergence (distributional compression). The econometric design applies a medium-horizon growth-window approach, operationalizing growth as the five-year annualized log change in PPP GDP per capita. The main estimation window covers 1995–2019, with a post-crisis robustness window (2000–2019) to reduce sensitivity to late-1990s shock dynamics. Descriptive results show pronounced heterogeneity in initial PPP income levels but substantial long-horizon gains among several initially lower-income economies. Regression estimates consistently yield a negative and statistically significant relationship between initial PPP income and subsequent medium-horizon growth across baseline and controlled specifications, supporting β-convergence. Dispersion analysis further indicates declining cross-economy inequality in PPP income over time, with particularly strong within-ASEAN compression relative to the comparator grouping. Overall, the combined β–σ evidence suggests that catch-up growth in Asia is empirically present but structured and heterogeneous, consistent with a convergence-with-clubs interpretation. The findings imply that convergence remains feasible for lagging Southeast Asian economies, but is best sustained through policies that reinforce investment capacity, productivity-linked openness and upgrading, macroeconomic stability, and resilience to growth-disrupting shocks.