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Markov or Not Markov � This Should Be a Question

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  • Frank Bickenbach
  • Eckhardt Bode

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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Bibliographic 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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References

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  1. S Durlauf & Danny Quah, 1998. "The New Empirics of Economic Growth," CEP Discussion Papers dp0384, Centre for Economic Performance, LSE.
  2. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  3. de la Fuente, Angel, 1997. "The empirics of growth and convergence: A selective review," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 23-73, January.
  4. Quah, Danny, 1993. "Empirical cross-section dynamics in economic growth," European Economic Review, Elsevier, vol. 37(2-3), pages 426-434, April.
  5. 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.
  6. Damien Neven & Claudine Gouymte, 1995. "Regional Convergence in the European Community," Journal of Common Market Studies, Wiley Blackwell, vol. 33(1), pages 47-65, 03.
  7. 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.
  8. Friedman, Milton, 1992. "Do Old Fallacies Ever Die?," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2129-32, December.
  9. Magrini, Stefano, 1999. "The evolution of income disparities among the regions of the European Union," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 257-281, March.
  10. Eckhardt Bode, 2001. "Is Regional Innovative Activity Path-dependent? An Empirical Analysis for Germany," Kiel Working Papers 1058, Kiel Institute for the World Economy.
  11. Wolfgang Keller, 1999. "How Trade Patterns and Technology Flows Affect Productivity Growth," NBER Working Papers 6990, National Bureau of Economic Research, Inc.
  12. Fingleton, Bernard, 1997. "Specification and Testing of Markov Chain Models: An Application to Convergence in the European Union," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(3), pages 385-403, August.
  13. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  14. Quah, Danny, 1993. " Galton's Fallacy and Tests of the Convergence Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 427-43, December.
  15. Bode, Eckhardt, 1998. "Lokale Wissensdiffusion und regionale Divergenz in Deutschland," Open Access Publications from Kiel Institute for the World Economy 1038, Kiel Institute for the World Economy (IfW).
  16. Sergio J. Rey, 2001. "Spatial Dependence in the Evolution of Regional Income Distributions," Urban/Regional 0105001, EconWPA.
  17. Bulli, Sandra, 2001. "Distribution Dynamics and Cross-Country Convergence: A New Approach," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(2), pages 226-43, May.
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Cited by:
  1. Eckey, Hans-Friedrich & Türck, Matthias, 2007. "Convergence of EU-Regions. A Literature Report," Investigaciones Regionales, Asociación Española de Ciencia Regional, issue 10, pages 5-32.
  2. Paul Bishop & Peter Gripaios, 2005. "Patterns Of Persistence And Mobility In Gdp Per Head Across Gb Counties," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 96(5), pages 529-540, December.
  3. Zier, Patrick, 2013. "Econometric impact assessment of the Common Agricultural Policy in East German agriculture," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 71, number 71.

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