Income convergence clubs for Brazilian Municipalities: a non-parametric analysis

Abstract

This article analyses the evolution of relative per capita income distribution of Brazilian municipalities over the period 1970–1996. Analyses are based on non-parametric methodologies and do not assume probability distributions or functional forms for the data. Two convergence tests have been carried out – a test for sigma convergence based on the bootstrap principle and a beta convergence test using smoothing splines for the growth regressions. The results obtained demonstrate the need to model the dynamics of income for Brazilian municipalities as a process of convergence clubs, using the methodology of transition matrices and stochastic kernels. The results show the formation of two convergence clubs, a low income club formed by the municipalities of the North and Northeast regions, and another high income club formed by the municipalities of the Center-West, Southeast and South regions. The formation of convergence clubs is confirmed by a bootstrap test for multimodality.