Structural Breaks and Unit Root Tests for Short Panels Elias Tzavalis* Department of Economics Queen Mary, University of London London E1 4NS (email: E.Tzavalis@qmul.ac.uk) This version July 2002 Abstract In this paper we suggest panel data unit root tests which allow for a potential structural break in the individual e¤ects and/or the trends of each series of the panel, assuming that the time-dimension of the panel, T , is …xed. The proposed test statistics consider for the case that the break point is known and for the case that it is unknown. Monte Carlo evidence suggests that they have size which is very close to the nominal …ve percent level and power which is analogues to that of Harris and Tzavalis (1999) test statistics, which do not allow for a structural break. JEL classi…cation : C22, C23 Keywords : Panel data; Unit roots; Structural Breaks; Sequential Unit Root tests; Central Limit Theorem; economic convergence hypothesis *This research was funded by the ESRC under grant R000239139 1