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Non-stationary transition matrices: An overlooked issue in intra-distribution dynamics

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  • Hierro, María
  • Maza, Adolfo

Abstract

Previous papers dealing with the dynamics of income distributions have generally assumed stationary transition probabilities, effectively ruling out the possibility that intra-distribution dynamics change over time. This paper shows that the Chapman-Kolmogorov equation can be used to capture this added complexity. The paper also emphasizes that a test for stationarity should be carried out routinely because the stationarity assumption could lead to misleading conclusions.

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  • Hierro, María & Maza, Adolfo, 2009. "Non-stationary transition matrices: An overlooked issue in intra-distribution dynamics," Economics Letters, Elsevier, vol. 103(2), pages 107-109, May.
    • Handle: RePEc:eee:ecolet:v:103:y:2009:i:2:p:107-109
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    Cited by:

    1. Park, Seonyoung & Shin, Donggyun, 2020. "Recent Changes in the Nature of Distribution Dynamics of US County Incomes," Working Paper Series 20926, Victoria University of Wellington, School of Economics and Finance.
    2. María Hierro & Adolfo Maza, 2015. "From Discrete To Continuous-Time Transition Matrices In Intra-Distribution Dynamics Analysis: An Application To Per Capita Wealth In Europe," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 227-235, July.
    3. Margherita Gerolimetto & Stefano Magrini, 2017. "A Novel Look at Long-run Convergence Dynamics in the United States," International Regional Science Review, , vol. 40(3), pages 241-269, May.
    4. Tuomas Malinen, 2011. "Income Inequality and Savings: A Reassessment of the Relationship in Cointegrated Panels," DEGIT Conference Papers c016_076, DEGIT, Dynamics, Economic Growth, and International Trade.
    5. Park, Seonyoung & Shin, Donggyun, 2020. "Recent Changes in the Nature of Distribution Dynamics of US County Incomes," Working Paper Series 8075, Victoria University of Wellington, School of Economics and Finance.
    6. Tuomas, Malinen, 2011. "Inequality and savings: a reassesment of the relationship in cointegrated panels," MPRA Paper 33350, University Library of Munich, Germany.

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