Peaks vs Components


  • We would like to thank David Canning, Oded Galor, Stephan Klasen and Holger Strulik for helpful comments.

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We analyze the cross-national distribution of gross domestic product (GDP) per capita and its evolution from 1970 to 2009. We argue that peaks are not a suitable measure for distinct convergence clubs/equilibria in the cross-country distribution of GDP per capita, because the number of peaks is not invariant under non-linear strictly monotonic transformations of the data such as the logarithmic transformation. Instead, we model the distribution as a finite mixture, and determine its number of components via statistical testing. We find that the number of components in the cross-country distribution changes from three to two in the mid 1990s.