Peaks vs. Components

Sebastian Vollmer
Hajo Holzmann
Florian Schwaiger

Abstract

We analyze the cross-national distribution of GDP per capita and its evo- lution from 1970 to 2009. We argue that peaks are not a suitable measure for distinct convergence clubs/equilibria in the cross-country distribution of GDP per capita, because the number of peaks is not invariant under non- linear strictly monotonic transformations of the data such as the logarithmic transformation. Instead, we model the distribution as a finite mixture, and determine its number of components via statistical testing. We find that the number of components in the cross-country distribution changes from three to two in the mid 1990s.