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Boats and Tides and Trickle Down Theories: What Stochastic Process Theory Has To Say About Modeling Poverty, Inequality, Mobility and Polarization

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  • Gordon Anderson
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    Abstract

    Aphorisms that “Rising tides raise all boats” or that material advances of the rich eventually “Trickle Down” to the poor are really maxims regarding the nature of stochastic processes that underlay the income paths of groups of individuals. This paper looks at the implications of conventional assumptions made by economists concerning such processes for the empirical analysis of wellbeing in terms of poverty, inequality, mobility and polarization. The implications of attributing different processes to different groups in society following the club convergence literature are also discussed. Various forms of poverty, inequality and income mobility structures are considered and much of the conventional wisdom afforded us by such aphorisms is questioned. To exemplify these ideas the results are applied to the distribution of GDP per capita in the continent of Africa.

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    File URL: http://www.economics.utoronto.ca/public/workingPapers/tecipa-377.pdf
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    Bibliographic Info

    Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-377.

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    Length: 36 pages
    Date of creation: 23 Oct 2009
    Date of revision:
    Handle: RePEc:tor:tecipa:tecipa-377

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    Keywords: Stochastic Processes; Poverty; Inequality; Mobility; Polarization;

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