Abstract
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 observe countries growth experiences over the 1970–2000 period and find evidence for 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 address 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.
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We are grateful for helpful comments from Oded Galor, Paul Johnson, David Weil, an Associate Editor and two anonymous referees.
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Owen, A.L., Videras, J. & Davis, L. Do all countries follow the same growth process?. J Econ Growth 14, 265–286 (2009). https://doi.org/10.1007/s10887-009-9046-x
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DOI: https://doi.org/10.1007/s10887-009-9046-x