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Empirical evidence of income dynamics across EU regions

  • Roberto Zelli

    (University of Rome 'La Sapienza', 00185 Rome, Italy)

  • Maria Grazia Pittau

    (University of Rome 'La Sapienza', 00185 Rome, Italy)

This paper analyses the distribution of purchasing power standardized per capita income across EU-12 regions between 1977 and 1996. Dispersion of incomes between regions is measured taking into account their population sizes. The cross-sectional distributions are initially described by weighted kernel density estimates, revealing a multimodal structure of the distributions, less evident over the period. This evidence is supported by a bootstrap test. To detect homogeneous groups of regions, the empirical distributions are approximated by a finite mixture of normal densities. The components of the mixture represent clusters of poor|rich regions, while the mixing proportions the allocation over the poor and the rich components. The number of components is assessed by a bootstrap LR test, and the goodness of fit by a kernel density-based test. Income mobility is modelled by the stochastic kernel, the continuous counterpart of the transition probability matrix. The main implication is a very slow process of catching up of the poorest regions with the richer ones and a process of shifting away of a small group of very rich regions. This evidence is reflected in the shape of the ergodic distribution, which is well fitted by a two-component mixture model. Copyright © 2006 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 21 (2006)
Issue (Month): 5 ()
Pages: 605-628

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Handle: RePEc:jae:japmet:v:21:y:2006:i:5:p:605-628
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  1. Baldwin, Richard E & Martin, Philippe & Ottaviano, Gianmarco I P, 2001. " Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," Journal of Economic Growth, Springer, vol. 6(1), pages 5-37, March.
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  8. Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 205-253, 04.
  9. Bart Verspagen & Marjolein C.J. Cani, ls, 2001. "Barriers to knowledge spillovers and regional convergence in an evolutionary model," Journal of Evolutionary Economics, Springer, vol. 11(3), pages 307-329.
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