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Dealing with heterogeneity, nonlinearity and club misclassification in growth convergence: A nonparametric two-step approach

  • Harry Haupt

    ()

    (Centre for Statistics, Bielefeld University)

  • Verena Meier

    (Department of Business Administration and Economics, Bielefeld University)

Classical growth convergence regressions fail to account for various sources of heterogeneity and nonlinearity. While recent contributions are able to address either the one or the other, we present a simple two-step method to address both issues. Based on a slightly augmented version of a recently proposed algorithm to identify convergence clubs, we formulate a flexible nonlinear framework which allows to analyze convergence effects on both individual and club level, while alleviating potential misclassification in the club formation process using simultaneous smoothing over the club structure. The merits of the method are illustrated for data on different aggregational levels.

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File URL: http://www.imw.uni-bielefeld.de/papers/files/imw-wp-455.pdf
File Function: First version, 2011
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Paper provided by Bielefeld University, Center for Mathematical Economics in its series Working Papers with number 455.

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Length: 47 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:bie:wpaper:455
Contact details of provider: Postal: Postfach 10 01 31, 33501 Bielefeld
Phone: +49(0)521-106-4907
Web page: http://www.imw.uni-bielefeld.de/

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