Paper #404

Title:

Testing for convergence clubs in income per-capita: A predictive density approach

Author:

Fabio Canova

Date:

July 1997 (Revised: June 1999)

Abstract:

The paper proposes a technique to jointly test for groupings of unknown size in the cross sectional dimension of a panel and estimates the parameters of each group, and applies it to identifying convergence clubs in income per-capita. The approach uses the predictive density of the data, conditional on the parameters of the model. The steady state distribution of European regional data clusters around four poles of attraction with different economic features. The distribution of income per-capita of OECD countries has two poles of attraction and each group has clearly identifiable economic characteristics.

Keywords:

Heterogeneities, panel data, predictive density, income inequality

JEL codes:

C11, D90, O47

Area of Research:

Macroeconomics and International Economics

Published in:

International Economic Review, 45(1), 2004, 49-77

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