Boats and tides and "Trickle Down" theories: What economists presume about wellbeing when they employ stochastic process theory in modeling behavior
AbstractAphorisms 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/wellbeing paths of groups of individuals. This paper looks at the implications for the empirical analysis of wellbeing of conventional assumptions regarding such processes which are employed by both micro and macro economists in modeling economic behavior. The implications of attributing different processes to different groups in society following the club convergence literature are also discussed. Various forms of poverty, inequality, polarization 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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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2012-28.
Date of creation: 2012
Date of revision:
Stochastic processes; poverty; inequality; wellbeing measurement;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
This paper has been announced in the following NEP Reports:
- NEP-AFR-2012-07-01 (Africa)
- NEP-ALL-2012-07-01 (All new papers)
- NEP-HAP-2012-07-01 (Economics of Happiness)
- NEP-HME-2012-07-01 (Heterodox Microeconomics)
- NEP-HPE-2012-07-01 (History & Philosophy of Economics)
- NEP-LTV-2012-07-01 (Unemployment, Inequality & Poverty)
- NEP-PKE-2012-07-01 (Post Keynesian Economics)
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