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Do all countries follow the same growth process?

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  • Davis, Lewis
  • Owen, Ann L.
  • Videras, Julio

Abstract

We estimate a finite mixture model in which countries are sorted into groups based on the similarity of the conditional distributions of their growth rates. We strongly reject the hypothesis that all countries follow a common growth process in favor of a model in which there are two classes of countries, each with its own distinct growth process. Group membership does not conform to the usual categories used to control for parameter heterogeneity such as region or income. However, we find strong evidence that one country characteristic that helps to sort countries into different regimes is the quality of institutions, specifically, the degree of law and order. Once institutional features of the economy are controlled for, we find no evidence that geographic characteristics play a role in determining the country groupings.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11589.

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Date of creation: Nov 2007
Date of revision: Sep 2008
Handle: RePEc:pra:mprapa:11589

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Keywords: finite mixture models; multiple equilibria; institutional quality;

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