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Testing for country heterogeneity in growth models using a finite mixture approach

  • Marco Alfo

    (Dipartimento di Statistica, Probabilit� e Statistiche Applicate, 'Sapienza' Universit� di Roma, Rome, Italy)

  • Giovanni Trovato

    (Dipartimento di Economia e Istituzioni, Universit� di Roma 'Tor Vergata', Rome Italy)

  • Robert J. Waldmann

    (Dipartimento di Economia e Istituzioni, Universit� di Roma 'Tor Vergata', Rome Italy)

We define a bivariate mixture model to test whether economic growth can be considered exogenous in the Solovian sense. For this purpose, the multivariate mixture approach proposed by Alf� and Trovato is applied to the Bernanke and Gürkaynak extension of the Solow model. We find that the explanatory power of the Solow growth model is enhanced, since growth rates are not statistically significantly associated with investment rates, when cross-country heterogeneity is considered. Moreover, no sign of convergence to a single equilibrium is found. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.1008
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 23 (2008)
Issue (Month): 4 ()
Pages: 487-514

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Handle: RePEc:jae:japmet:v:23:y:2008:i:4:p:487-514
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