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Markov or Not Markov — This Should Be a Question

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Author Info
Frank Bickenbach
Eckhardt Bode

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Abstract

Although it is well known that Markov process theory, frequently applied in the literature on income convergence, imposes some very restrictive assumptions upon the data generating process, these assumptions have generally been taken for granted so far. The present paper proposes, resp. recalls chi-square tests of the Markov property, of spatial independence, and of homogeneity across time and space to assess the reliability of estimated Markov transition matrices. As an illustration we show that the evolution of the income distribution across the 48 coterminous U.S. states from 1929 to 2000 clearly has not followed a Markov process.

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Publisher Info
Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1086.

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Length: 28 pages
Date of creation: Dec 2001
Date of revision:
Handle: RePEc:kie:kieliw:1086

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Related research
Keywords: Convergence; Markov process; chi-square tests; U.S. regional growth;

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Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

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  2. Loewy, Michael B. & Papell, David H., 1996. "Are U.S. regional incomes converging? Some further evidence," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 587-598, December. [Downloadable!] (restricted)
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  4. Quah, Danny, 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis," CEPR Discussion Papers 820, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March. [Downloadable!] (restricted)
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  8. Fingleton, B & McCombie, J S L, 1998. "Increasing Returns and Economic Growth: Some Evidence for Manufacturing from the European Union Regions," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 89-105, January.
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  11. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier. [Downloadable!] (restricted)
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  12. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May. [Downloadable!] (restricted)
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  13. Barro, R.J. & Sala-I-Martin, X., 1991. "Convergence," Papers 645, Yale - Economic Growth Center.
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  14. Eckhardt Bode, 2001. "Is Regional Innovative Activity Path-dependent? An Empirical Analysis for Germany," Kiel Working Papers 1058, Kiel Institute for the World Economy. [Downloadable!]
  15. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December. [Downloadable!] (restricted)
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