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Inequality convergence revisited: Evidence from stationarity panel tests with breaks and cross correlation

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  • Lin, Pei-Chien
  • Huang, Ho-Chuan (River)

Abstract

This paper empirically examines whether there exists stochastic convergence of income inequality among 48 contiguous states within the US over the 1916–2005 period. For that purpose, we employ the recently developed panel stationarity test of Carrion-i-Silvestre, Del Barrio-Castro and López-Bazo (2005), which assumes a highly flexible trend function by incorporating an unknown number of structural breaks. In addition, the issues of cross-sectional dependence as well as control for finite-sample bias are accommodated through bootstrap methods. Overall, for the US case, our analysis provides strong evidence in support of the hypothesis of inter-state inequality convergence. Moreover, the results are robust to alternative inequality measures applied, different notions of stochastic convergence defined, and alternative panel stationary test employed.

Suggested Citation

  • Lin, Pei-Chien & Huang, Ho-Chuan (River), 2012. "Inequality convergence revisited: Evidence from stationarity panel tests with breaks and cross correlation," Economic Modelling, Elsevier, vol. 29(2), pages 316-325.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:2:p:316-325
    DOI: 10.1016/j.econmod.2011.10.009
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    3. Omid Ranjbar & Tsangyao Chang & Chien-Chiang Lee, 2016. "Income Convergence toward USA: New Evidences for Latin and South American Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 20(2), pages 141-162, Spring.
    4. Nicholas Apergis & Christina Christou & Rangan Gupta & Stephen M. Miller, 2018. "Convergence in Income Inequality: Further Evidence from the Club Clustering Methodology across States in the U.S," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(2), pages 147-161, May.
    5. Yiannis Karavias & Elias Tzavalis, 2014. "Testing for unit roots in panels with structural changes, spatial and temporal dependence when the time dimension is finite," Discussion Papers 14/03, University of Nottingham, Granger Centre for Time Series Econometrics.
    6. Periklis Gogas & Rangan Gupta & Stephen M. Miller & Theophilos Papadimitriou & Georgios Antonios Sarantitis, 2015. "Income Inequality: A State-by-State Complex Network Analysis," Working Papers 201534, University of Pretoria, Department of Economics.
    7. Chambers, Dustin & Dhongde, Shatakshee, 2016. "Convergence in income distributions: Evidence from a panel of countries," Economic Modelling, Elsevier, vol. 59(C), pages 262-270.
    8. Gogas, Periklis & Gupta, Rangan & Miller, Stephen M. & Papadimitriou, Theophilos & Sarantitis, Georgios Antonios, 2017. "Income inequality: A complex network analysis of US states," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 483(C), pages 423-437.
    9. Guo Yanling & Sell Friedrich L., 2021. "Equilibrium and Convergence in Income Distribution: The Case of 28 European Countries in the Recent, Turbulent Past (1995–2019)," Central European Economic Journal, Sciendo, vol. 8(55), pages 95-125, January.
    10. Xingle Long & Chuanwang Sun & Chao Wu & Bin Chen & Kofi Agyenim Boateng, 2020. "Green innovation efficiency across China’s 30 provinces: estimate, comparison, and convergence," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 25(7), pages 1243-1260, October.
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    13. Connaughton, John E. & Swartz, Caroline, 2015. "Changes in State PCPI Rankings," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(1).
    14. 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.
    15. Kaddour Hadri & Eiji Kurozumi & Daisuke Yamazaki, 2015. "Synergy between an Improved Covariate Unit Root Test and Cross-sectionally Dependent Panel Data Unit Root Tests," Manchester School, University of Manchester, vol. 83(6), pages 676-700, December.
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    More about this item

    Keywords

    Inequality; Convergence; Panel data;
    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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