Latin American Clubs: Uncovering Patterns of Convergence

This paper explores the dynamics of convergence in Latin American countries and asks whether there are tendencies for converging to different clubs. The analysis shows clear differences between two groups: a large group of low-to-middle income countries and a small group of rich ountries. The club of low-to-middle income countries showed a tendency of spreading out until the mid 1990s and slight convergence afterwards. At the same time, the distance between the rich countries and the low-to-middle income countries faded away over time,particularly during the 1980s. However, during most of the 1990s, when convergence was occurring in the group of low-to-middle income countries, the rich countries started to pull away clearly distancing themselves again as a different club. The study of club behavior is important because the presence of clubs might suggest that there are common factors among groups of countries leading them to develop (and converge) in similar fashion. Identifying such common factors (if they exist) might improve our understanding of why some countries in the region grow faster than others. This is not possible to analyze with traditional growth regressions that employ a single catching up parameter or with a dispersion statistics like the sigma-convergence. Since these methods cannot detect club behavior much less they can analyze the reasons behind their formation.