We would like to thank David Canning, Oded Galor, Stephan Klasen and Holger Strulik for helpful comments.
Peaks vs Components
Article first published online: 19 APR 2013
© 2013 Blackwell Publishing Ltd
Review of Development Economics
Volume 17, Issue 2, pages 352–364, May 2013
How to Cite
Vollmer, S., Holzmann, H. and Schwaiger, F. (2013), Peaks vs Components. Review of Development Economics, 17: 352–364. doi: 10.1111/rode.12036
- Issue published online: 19 APR 2013
- Article first published online: 19 APR 2013
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.