Absolute convergence and Mobility

Matrix

Debajit Jha
Jindal School of Government and Public Policy
O. P. Jindal Global University
Mobility Matrix
• Even though we discussed in detail about the hypothesis of ultimate convergence
of all countries to a common standard of living, an alternative way of presenting
is based on Quah [1993].

• He used per capita income data from Summers-Heston data set to construct
“mobility matrices” for countries.

• To understand how these matrices work, let’s start by converting all per capita
incomes to fractions of the world’s per capita income.

• Thus, if country X has a per capita income of $1,000 and the world average is
$2,000, we give country X an index of 1/2.
• Now let’s create categories that we will put each country into.

• Quah used the following categories: 1/4, 1/2, 1, 2, and ∞.

• For instance, a category with the label 2 contains all countries with
indexes between 1 and 2;

• Similarly, the category 1/4 contains all countries with indexes less
than 1/4; and the category ∞ contains all countries with indexes
exceeding 2, and so on.
• Now imagine doing this exercise for two points Income mobility of countries, 1962–84
in time, with a view to finding out if a country
transited from one category to another during
this period.

• You will generate what we might call a mobility

matrix. The diagram in the next slide illustrates
this matrix for the twenty-three year period
1962–84, using the Summers–Heston data set.

• The rows and columns of the matrix are exactly

the categories that we just described.

• Thus a cell of this matrix defines a pair of

categories. What you see is a number in each of
these cells. Source: Quah [1993]
 The income mobility of countries, 1962–84
• For example, the entry 26 in the cell defined by
the categories 1 (row) and 2 (column).

• This entry tells us the percentage of countries

that made the transition from one category to
the other over the twenty-three year period.

• In this example, therefore, 26% of the countries

who were between half the world average and
the world average in 1962 transited to being
between the world average and twice the
world average in 1984.

Source: Quah [1993]

• A matrix constructed in this way gives you a fairly good sense of how much
mobility there is in relative per capita GNP across nations.

• A matrix with very high numbers on the main diagonal, consisting of those special
cells with the same row and column categories, indicates low mobility.

• According to such a matrix, countries that start off in a particular category have a
high probability of staying right there.

• Conversely, a matrix that has the same numbers in every entry (which must be 20
in our 5 × 5 case, given that the numbers must sum to 100 along each row) shows
an extraordinarily high rate of mobility.

• Regardless of the starting point in 1962, such a matrix will give you equal odds of
being in any of the categories in 1984.
 The income mobility of countries, 1962–84
• Notice that middle-income countries have far greater mobility
than either the poorest or the richest countries.

• For instance, countries in category 1 (between half the world

average and the world average) in 1962 moved away to “right”
and “left”: less than half of them remained where they were in
1962.

• In stark contrast to this, over three-quarters of the poorest

countries (category 1/4) in 1962 remained where they were,
and none of them went above the world average by 1984.

• Likewise, fully 95% of the richest countries in 1962 stayed right

where they were in 1984.

• This is interesting because it suggests that although everything

is possible (in principle), a history of underdevelopment or
extreme poverty puts countries at a tremendous disadvantage.

Source: Quah [1993]

 The income mobility of countries, 1962–84
• There is actually a bit more to the figure than lack of
mobility at the extremes.

• Look at the next-to poorest category (those with incomes

between one-quarter and one-half of the world average
in 1962).

• Note that 7% of these countries transited to incomes

above the world average by 1984.

• However, over half of them dropped to an even lower

category.

• Thus it is not only the lowest-income countries that

might be caught in a very difficult situation. In general, at
low levels of income, the overall tendency seems to be
movement in the downward direction.
Source: Quah [1993]