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Stochastic Convergence Across Brazilian States

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We analyze the dynamic properties of the relative income of Brazilian states for the 1985-2008 period. Unit root tests suggest that shocks to relative income have permanent effects, contradicting the stochastic convergence hypothesis. On the other hand, interval estimates of the largest autoregressive root produce wide confidence intervals that include many alternatives consistent with stationarity. Additionally, the confidence interval estimate of the half-life suggests that relative income shocks die out relatively quick, within an average of 0 to 5 years. These results suggest that relative income shocks have a temporary effect, thus supporting the stochastic convergence hypothesis. Furthermore, we build a relative income series for the Brazilian states for the 1947-2008 period andredo the exercises above. Finally, all of our results remain the same when we extend the sample to the 1947-2008 period.

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  • Mello, Marcelo, 2010. "Stochastic Convergence Across Brazilian States," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 30(1), October.
    • Handle: RePEc:sbe:breart:v:30:y:2010:i:1:a:2830
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    1. Marcelo Mello & Roberto Guimaraes-Filho, 2007. "A note on fractional stochastic convergence," Economics Bulletin, AccessEcon, vol. 3(16), pages 1-14.
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    6. Lima, Luiz Renato & Notini, Hilton Hostalácio & Reis Gomes, Fábio Augusto, 2010. "Empirical Evidence on Convergence Across Brazilian States," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 64(2), June.
    7. Stock, James H., 1991. "Confidence intervals for the largest autoregressive root in U.S. macroeconomic time series," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 435-459, December.
    8. Rossi, Barbara, 2005. "Confidence Intervals for Half-Life Deviations From Purchasing Power Parity," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 432-442, October.
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    1. Sanghamitra Bandyopadhyay, 2021. "The persistence of inequality across Indian states: A time series approach," Review of Development Economics, Wiley Blackwell, vol. 25(3), pages 1150-1171, August.

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