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Mixture Models and Convergence Clubs

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Author Info
Pittau, Maria Grazia () (DSPSA, Sapienzia University of Rome)
Zelli, Roberto () (DSPSA, Sapienzia University of Rome)
Johnson, Paul () (Department of Economics, Vassar College)

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Abstract

In this paper we argue that modeling the cross-country distribution of per capita income as a mixture distribution provides a natural framework for the detection of convergence clubs. The framework yields tests for the number of component distributions that are likely to have more power than "bump hunting" tests and includes a natural method of assessing the cross-component immobility necessary to imply a correspondence between components and convergence clubs. Applying the mixture approach to cross-country per capita income data for the period 1960 to 2000 we find evidence of three component densities in each of the nine years that we examine. We find little cross-component mobility and so interpret the multiple mixture components as representing convergence clubs. We document a pronounced tendency for the strength of the bonds between countries and clubs to increase. We show that the well-known "hollowing out" of the middle of the distribution is largely attributable to the increased concentration of the rich countries around their component means. This increased concentration as well as that of the poor countries around their component mean produces a rise in polarization in the distribution over the sample period.

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Paper provided by Vassar College Department of Economics in its series Vassar College Department of Economics Working Paper Series with number 91.

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  1. Charles I. Jones, . "On the Evolution of the World Income Distribution," Working Papers 97009, Stanford University, Department of Economics. [Downloadable!]
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  2. Paapaa, Richard & van Dijk, Herman K., 1998. "Distribution and mobility of wealth of nations," European Economic Review, Elsevier, vol. 42(7), pages 1269-1293, July. [Downloadable!] (restricted)
  3. Efthymios G. Tsionas, 2000. "Regional Growth and Convergence: Evidence from the United States," Regional Studies, Taylor and Francis Journals, vol. 34(3), pages 231-238, May. [Downloadable!] (restricted)
  4. Maria Grazia Pittau, 2005. "Fitting Regional Income Distributions in the European Union," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(2), pages 135-161, 04. [Downloadable!] (restricted)
  5. Hanfeng Chen & Jiahua Chen & John D. Kalbfleisch, 2004. "Testing for a finite mixture model with two components," Journal Of The Royal Statistical Society Series B, Royal Statistical Society, vol. 66(1), pages 95-115. [Downloadable!] (restricted)
  6. Bianchi, Marco, 1997. "Testing for Convergence: Evidence from Non-parametric Multimodality Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(4), pages 393-409, July-Aug.. [Downloadable!]
  7. repec:att:wimass:199419r is not listed on IDEAS
  8. Roberto Zelli & Maria Grazia Pittau, 2006. "Empirical evidence of income dynamics across EU regions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 605-628. [Downloadable!]
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