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Income inequality may not converge after all: Testing panel unit roots in the presence of cross-section cointegration

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  • Ho, Tsung-wu

Abstract

This paper empirically examines whether there exists stochastic convergence of income inequality among 48 contiguous US states from 1916 to 2012. To control long-run cross-section dependency in panel data, we apply the orthogonal instrument generating approach of Chang and Song (2009) to test unit root. Our results, unlike the literature, do not support the convergence hypothesis. Moreover, we confirm that long-run cross-section correlation has substantial impacts, which are robust to all inequality measures as well as quantile differentials. In addition, although there is a given rising trend, the income distribution of the United States is state-specific and does not converge to either the national level or the state-average.

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  • Ho, Tsung-wu, 2015. "Income inequality may not converge after all: Testing panel unit roots in the presence of cross-section cointegration," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 68-79.
    • Handle: RePEc:eee:quaeco:v:56:y:2015:i:c:p:68-79
    DOI: 10.1016/j.qref.2014.10.005
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    Cited by:

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    2. OlaOluwa S. Yaya & Fumitaka Furuoka & Kiew Ling Pui & Ray Ikechukwu Jacob & Chinyere M. Ezeoke, 2020. "Investigating Asian regional income convergence using Fourier Unit Root test with Break," International Economics, CEPII research center, issue 161, pages 120-129.
    3. Kolawole Ogundari, 2023. "Club Convergence in Income Inequality in Africa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 167(1), pages 319-337, June.
    4. Ioannis Bournakis & Mona Said & Antonio Savoia & Francesco Savoia, 2021. "Regional Income Inequality in Egypt: Evolution and Implications for Sustainable Development Goal 10," LIS Working papers 798, LIS Cross-National Data Center in Luxembourg.
    5. Christina Stacy & Brady Meixell & Tanaya Srini, 2019. "Inequality Versus Inclusion in US Cities," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 145(1), pages 117-156, August.
    6. Nora Lustig & Daniel Teles, 2016. "Inequality convergence: How sensitive are results to the choice of data?," Working Papers 412, ECINEQ, Society for the Study of Economic Inequality.
    7. Claudia Suárez‐Arbesú & Nicholas Apergis & Francisco J. Delgado, 2023. "Club convergence and factors of income inequality in the European Union," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3654-3666, October.

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    More about this item

    Keywords

    Inequality convergence; Panel unit root; Cross-section cointegration; Quantile differentials; Orthogonal instrument generating function;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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