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Testing for country heterogeneity in growth models using a finite mixture approach

Author

Listed:
  • Marco Alfo

    (Dipartimento di Statistica, Probabilità e Statistiche Applicate, 'Sapienza' Università di Roma, Rome, Italy)

  • Giovanni Trovato

    (Dipartimento di Economia e Istituzioni, Università di Roma 'Tor Vergata', Rome Italy)

  • Robert J. Waldmann

    (Dipartimento di Economia e Istituzioni, Università di Roma 'Tor Vergata', Rome Italy)

Abstract

We define a bivariate mixture model to test whether economic growth can be considered exogenous in the Solovian sense. For this purpose, the multivariate mixture approach proposed by Alfò and Trovato is applied to the Bernanke and Gürkaynak extension of the Solow model. We find that the explanatory power of the Solow growth model is enhanced, since growth rates are not statistically significantly associated with investment rates, when cross-country heterogeneity is considered. Moreover, no sign of convergence to a single equilibrium is found. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Marco Alfo & Giovanni Trovato & Robert J. Waldmann, 2008. "Testing for country heterogeneity in growth models using a finite mixture approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(4), pages 487-514.
    • Handle: RePEc:jae:japmet:v:23:y:2008:i:4:p:487-514
    DOI: 10.1002/jae.1008
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