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Extending Theil's Inequality Index: Addressing Dynamic Convergence in the OECD

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  • Weatherspoon, Dave D.
  • Seale, James L., Jr.
  • Moss, Charles B.

Abstract

Theil’s inequality index is used to measure convergence in 14 Organization for Economic Cooperation and Development (OECD) countries in terms of per capita income, per capita government and investment expenditures, and industrial employment. Results indicate that all four variables have converged over the sample period, 1950-1988. Next, the indices of the four variables are made dynamic by using pairwise cointegration and Johansen’s I(2) multi-cointegration tests. These tests indicate that the four inequalities are cointegrated; that is, there exists a long-run equilibrium between the four inequalities of the 14 OECD countries. However, the inequality in per capita government expenditure has no effect on the G-7 equilibrium when analyzed without the Other 7.

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Bibliographic Info

Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 35 (2003)
Issue (Month): ()
Pages:

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Handle: RePEc:ags:joaaec:43300

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Web page: http://www.saea.org/jaae/jaae.htm
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Keywords: cointegration; convergence; G-7; inequality; OECD;

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  1. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  2. Adams, James D, 1990. "Fundamental Stocks of Knowledge and Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 673-702, August.
  3. Deepak, Sri Devi & Seale, James L., Jr. & Moss, Charles B., 2003. "Per Capita Income, Human Capital, and Inequality Convergence: A Latent-Variable Approach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35.
  4. Seale, James Jr. & Theil, Henri & Deepak, Sri Devi, 1994. "Growth and its disparity in rich and poor regions," Economics Letters, Elsevier, vol. 45(4), pages 467-470, August.
  5. Johansen, Søren, 1992. "A Representation of Vector Autoregressive Processes Integrated of Order 2," Econometric Theory, Cambridge University Press, vol. 8(02), pages 188-202, June.
  6. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
  7. Lars Osberg, 1998. "Economic Insecurity," Discussion Papers 0088, University of New South Wales, Social Policy Research Centre.
  8. Summers, Robert & Heston, Alan, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950-1988," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 327-68, May.
  9. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-20, July.
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