Income convergence and divergence

What is the rate of income convergence? what factors affect income convergence. These are some of the important research issues.

It is obvious that per capita income in urban area is higher than that of rural area. The investment in Urban areas has higher rate of return. This is the main point of difference in rural and urban areas. To reduce relative poverty, there must be income convergence over time. If it diverges, it will increase income inequality and relative poverty. we can measure income convergence using beta and sigma convergence techniques. If we regress, rate of income growth against the base year per capita income, the negative coefficient gives beta convergence. Sigma convergence holds if cross sectional standard deviations of log of per capita income decreases over time. another way to measure the per capita income convergence is to estimate long term conintegrating relation. if urban and rural income series conitegrate with each other, then in the long run it will converge.

Choice we have:

1. Rapid economic development along with income divergence between rural and urban

2. Slow economic development along with gradual income converegence between rural and urban

I am not sure which policy would be better, whether country should focus on rapid economic development through liberal policy or should focus on more equitable income distribution.

History shows that government controlled economy doesn't work, capitalism is also very vulnerable and risky and increases the income divergence among people and countries.