This study investigates the sources of cross-country income disparities in the context of time series dynamics for both aggregate and sectoral levels. We first introduce a new approach for testing income disparity persistence across countries. The method proposed by Pesaran, Pierse, and Lee...

Using a dynamic panel threshold model, we find a nonlinear effect of financial development on participation in the global value chains for 92 countries. The effect is positive below a threshold and turns negative above it. We provide evidence supporting our explanation that when a country’s...