Making Inferences About Rich Country - Poor Country Convergence: The Polarization Trapezoid and Overlap measures

Gordon Anderson, Teng Wah Leo () and Oliver Linton

Working Papers from University of Toronto, Department of Economics

Abstract: Underlying the unresolved debate over whether the gap between rich and poor country GNP per capita has narrowed is a concern for wellbeing. The issue is really about the changing shapes of distributions of wellbeing indicators. As limiting cases con- vergence between rich and poor country groups can be brought about by countries within groups becoming less alike without any diminution of growth rate differentials between them or it can be brought about by reductions in these differentials without any diminution of within group identity. In essence the debate is about the extent to which rich and poor countries are polarizing, a subject first theoretically explored by Esteban and Ray (1994). The empirical issue is about whether separate groups can be identified in the overall distribution and whether they are tending toward common or distinct equilibria. This paper proposes two simple statistics for the problem, the Overlap measure and the Trapezoidal measure, changes in which reflect a combination of increasing (decreasing) subgroup location differences and decreasing (increasing) subgroup spreads which are the characteristics of polarization (convergence). The former statistic is of use when the sub-distributions are identified, while the latter can be used whether or not the subgroups are identified. These techniques are applied to the examination of convergence in GDP per capita between rich and poor nations when growth is viewed either as a wellbeing index or a technology index (i.e. the data are, or are not, population weighted). It turns out that such a distinction matters, viewed technologically there is divergence, viewed in a wellbeing sense there is convergence. As a collection of countries Africa is diverging from the rest of the world whatever the perspective of growth.

Keywords: Convergence; Polarization; Trapezoid Measure; Overlap measure (search for similar items in EconPapers)
JEL-codes: I3 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-01-14
New Economics Papers: this item is included in nep-ltv
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