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

Alfó, Marco; Trovato, Giovanni; Waldmann, Robert

doi:10.1002/jae.1008

Cited by 63 publications

(39 citation statements)

References 47 publications

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“…The research most closely related to our work is Alfo, Trovato and Waldmann (2008 we are able to test simultaneously the alternative hypothesis that geographic characteristics determine growth regimes (Bloom et al, 2003). Finally, because we investigate characteristics that explain country classification, the interpretation of our approach is different.…”

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confidence: 99%

Do All Countries Follow the Same Growth Process?

2007

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We estimate finite-mixture models 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 regime. Group membership does not conform to the usual categories used to control for parameter heterogeneity such as region or income. We find strong evidence that the quality of institutions and specifically, the degree of law and order, helps to sort countries into different regimes. Once we control for institutional features of the economy, we find no evidence that geographic features such as latitude and being landlocked play a role in determining the country groupings.JEL Codes: O11, O17

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confidence: 99%

Do All Countries Follow the Same Growth Process?

2007

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“…3 Specifically, Paap et al (2005) apply a latent class analysis to sort a number of developing countries according to their average growth rates over the period 1961. Alfo et al (2008 develop a mixture of cross-sectional growth regression to uncover multiple regimes of per capita income convergence across EU regions for the period 1980.…”

Section: Introductionmentioning

confidence: 99%

International product life cycles, trade and development stages

Audretsch

Sanders

2017

J Technol Transf

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In this paper we first propose a proxy for early stage activity in a country's exports based on product life cycle theory. Employing a conditional latent class model, we then examine the relationship between this measure and economic growth for 93 countries during the period 1988-2005. We find that the impact of early stage activity differs across three clusters of countries. And we find that GDP levels can predict the cluster and the sign of the coefficient in a non-linear manner. In the richest countries, exporting products that are in an early stage of their product life cycle is associated with higher growth rates. In contrast, we find a cluster of middle income countries with high growth rates that grow faster by exporting more mature products that are in the later stages of their life cycle. Finally, early stage activity has no significant impact on growth in the cluster of the poorest, developing countries. Countries in early stages of development should focus on acquiring market share in mature markets with routine technologies whereas emerging economies face the challenge of at some point switching from copying mature to inventing new products as they approach the global technology frontier. At that frontier they must join the advanced economies who specialise in early stage innovative products to stay ahead of increasing competition from abroad.

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“…1,2 The educational level of the population increased greatly, but the growth of the skill level, especially when measured by the share of high-skill individuals, seems to be relatively modest, considering that enormous gaps in cognitive skills with developed economies remain (Hanushek and Woessmann, 2008). …”

Section: Introductionmentioning

confidence: 99%

“…4 This might indicate that basic education has become less effective in mitigating poverty but taking further education, especially of good quality, is increasingly difficult for the poor. In order to understand these facts, this paper develops a dynamic dual-economy model 1 To be exact, the modern-traditional classification is mainly based on technologies, while the formalinformal one is mainly based on official registrations of businesses, so they are distinct. Firms with modern technology may choose the informal sector due to heavy regulations or taxation (OECD, 2009).…”

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Education, Inequality, and Development in a Dual Economy

Yuki

2014

SSRN Journal

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In the post-WWII era, most developing economies had decent economic growth, but, with current growth trends, the great majority of them are unlikely to transform into developed economies in near future. In these economies, the dual economic structure, the coexistence of the modern/formal sector and the traditional/informal sector, is persistent.The educational level of the population increased greatly, but the growth of the skill level, especially when measured by the share of high-skill workers, is relatively modest. Wage inequality between workers with basic skills and with advanced skills rose over time, while the inequality between workers with and without basic skills fell greatly.In order to understand these facts, this paper develops a dynamic dual-economy model and examines how the long-run outcome of the economy depends on the initial distribution of wealth and sectoral productivity. It is shown that, for fast transformation into a developed economy, the initial distribution must be such that extreme poverty is not prevalent and the size of "middle class" is enough. If the former is satisfied but the latter is not, which would be the case for many developing economies falling into "middle income trap", the fraction of workers with basic skills and the share of the modern sector rise, but inequality between workers with advanced skills and with basic skills worsens and the traditional sector remains, consistent with the above-mentioned facts. JEL Classification Numbers: I25, J31, O15, O17

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

Cited by 63 publications

References 47 publications

Do All Countries Follow the Same Growth Process?

Do All Countries Follow the Same Growth Process?

International product life cycles, trade and development stages

Education, Inequality, and Development in a Dual Economy

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