convergence rates have begun to slow. Even at this peak rate, it would take nearly 140 years to halve the initial productivity gap between economies. While the average rate of convergence has been low, convergence rates for economies with good characteristics are substantially higher; new evidence suggests that the conditional convergence rate has accelerated in recent decades.

- **Convergence clubs** . Since 1970, countries have fallen into five distinct convergence clubs. The first club of countries, converging to the highest productivity levels, includes all advanced economies and several middle-income EMDEs that have experienced sustained long periods of robust growth since the 1990s. The second club includes the majority of upper-middle-income EMDEs while the third through fifth clubs include lower-middle and low-income countries.

- **Transition to higher-productivity convergence clubs: successful policies** . Increasing numbers of EMDEs have moved into the highest-level productivity club in recent decades, in contrast to older assessments of club convergence that found few positive convergence club transitions. These countries are found to have had a foundation of systematically better initial education levels and greater political stability, which has helped them deepen the complexity of their economies, with diversified production across a broad range of sectors outside of their original comparative advantage. Several country case studies highlight the importance of export-promotion, global value chain integration and FDI in transitioning to higher-productivity convergence clubs.

- **Challenging environment for convergence models** . EMDEs that have successfully shifted into higher-level productivity clubs have often relied upon manufacturing-led development—efforts to enhance the complexity and diversity of exports can prove to be high-reward but have also frequently been costly failures. This strategy faces increasing challenges due to falling global manufacturing employment and slower trade growth. In addition, a weak outlook for commodity prices and slow improvements in many key covariates of productivity growth, such as institutional quality, urbanization, and educational attainment pose further headwinds to both new and continuing transitions to high productivity levels.

This chapter examines convergence in labor productivity, defined as output per worker (at 2010 prices and exchange rates, Annex B). Labor productivity data are available for 103 countries since 1970, consisting of 29 advanced economies and 74 EMDEs. Labor productivity is more readily measured than total factor productivity (TFP), which can only be estimated on the basis of special assumptions. Labor productivity is also conceptually closer to per capita income, the variable of primary interest in discussions of global average living standards and the global income distribution. The dataset is constructed from national accounts, the World Bank’s World Development Indicators, The Conference Board, and the Penn World Table 9.1 (Annex B).

Section 2 discusses the evolution of convergence over time. Section 3 estimates the speed of convergence, both regardless of country characteristics and conditional on country characteristics. Section 4 provides evidence for the presence of club convergence assesses the characteristics of EMDEs who have demonstrated faster degrees of convergence. Section 5 concludes and discusses policy implications.

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