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Convergence Clubs Beyond GDP: A Non-Parametric Density Approach

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  • Mendez-Guerra, Carlos

Abstract

In the study of convergence in living standards across countries, per-capita Gross Domestic Product (GDP) has been usually used as a proxy for the measurement of national well-being. However, other important welfare aspects––beyond GDP––should also be considered. This paper revisits the cross-country convergence hypothesis in a context beyond GDP. It focuses on a novel welfare index [Jones and Klenow (2016), American Economic Review, 106(9)] that incorporates measures of consumption, leisure, life expectancy, and inequality. Based on a sample of 128 countries over the 1980-2007 period, the paper first documents the lack of overall sigma and (absolute) beta convergence. Next, through the lens of a stochastic kernel density and a clustering algorithm, it documents the formation of three convergence clubs. Under this classification, the beta convergence coefficient is recovered for each club. However, only the core members of the richest club appear to be reducing their welfare differences in a way that is consistent with the strong notion of sigma convergence. Overall, these results re-emphasize the finding that beta convergence is necessary but not sufficient for sigma convergence––even within convergence clubs and in a context beyond GDP.

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  • Mendez-Guerra, Carlos, 2017. "Convergence Clubs Beyond GDP: A Non-Parametric Density Approach," MPRA Paper 82048, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:82048
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    References listed on IDEAS

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    Cited by:

    1. Carlos Mendez, 2019. "Lack of Global Convergence and the Formation of Multiple Welfare Clubs across Countries: An Unsupervised Machine Learning Approach," Economies, MDPI, vol. 7(3), pages 1-17, July.

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    More about this item

    Keywords

    convergence clubs; national welfare; non-parametric kernel density; clustering algorithm;
    All these keywords.

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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