Reconciling conflicting evidence on the origins of comparative development: A finite mixture model approach

Thomas K.J. McDermott

No 130, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: In this paper, I revisit the controversy over the fundamental sources of comparative development. In contrast to much of the previous literature, my focus is on the appropriate specification of the empirical strategy. Using a finite mixture model approach and Monte Carlo simulations, I demonstrate that the standard linear estimation strategy may be mis-specified and as a result is likely to obscure the true effects of the variables used to explain cross-country income differences. My findings could potentially reconcile apparently conflicting results from the existing literature on the role of geography and institutions in comparative development.

Date: 2013-08
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Persistent link: https://EconPapers.repec.org/RePEc:lsg:lsgwps:wp130

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