Modeling parameter heterogeneity in cross-country regression models

Abstract

We employ various local generalizations of the Solow growth model that model parameter heterogeneity using adult literacy rates and life expectancy at birth. The model takes the form of a semiparametric varying coefficient model along the lines of Hastie and Tibshirani (1993). The empirical results show substantial parameter heterogeneity in the cross-country growth process, a finding that is consistent with the presence of multiple steady-state equilibria and the emergence of convergence clubs. © 2011 by Emerald Group Publishing Limited. All rights reserved.