Do all countries follow the same growth process?

Davis, Lewis and Owen, Ann L. and Videras, Julio (2007): Do all countries follow the same growth process?

Abstract

We estimate a finite mixture model 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 process. Group membership does not conform to the usual categories used to control for parameter heterogeneity such as region or income. However, we find strong evidence that one country characteristic that helps to sort countries into different regimes is the quality of institutions, specifically, the degree of law and order. Once institutional features of the economy are controlled for, we find no evidence that geographic characteristics play a role in determining the country groupings.

• Item Type: MPRA Paper
• Language: English
• Keywords: finite mixture models; multiple equilibria; institutional quality
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements

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