Abstract
This article shows that, contrary to common wisdom, the insurgence of a multiplicity of clusters in the distribution of income is not necessarily against the hypothesis of absolute convergence. Using data for the world economies, the US states, the EU regions, and the Italian regions, we find that despite the distribution of income per capita for both the world economies and for the Italian regions is multimodal, only in the former case absolute convergence can be rejected. Similarly, although the distributions for the EU regions and the US states are both unimodal, convergence is unambiguously taking place in the latter case only. We show that these results are consistent with the neoclassical model of growth in the presence of non-convexities in production. We conclude that polarization in the distribution of per capita incomes is neither a sufficient nor a necessary condition to reject the absolute convergence hypothesis.
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Caggiano, G., Leonida, L. Multimodality in the distribution of GDP and the absolute convergence hypothesis. Empir Econ 44, 1203–1215 (2013). https://doi.org/10.1007/s00181-012-0574-4
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DOI: https://doi.org/10.1007/s00181-012-0574-4