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Non-stationary transition matrices: An overlooked issue in intra-distribution dynamics

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  • Hierro, María
  • Maza, Adolfo

Abstract

Previous papers dealing with the dynamics of income distributions have generally assumed stationary transition probabilities, effectively ruling out the possibility that intra-distribution dynamics change over time. This paper shows that the Chapman-Kolmogorov equation can be used to capture this added complexity. The paper also emphasizes that a test for stationarity should be carried out routinely because the stationarity assumption could lead to misleading conclusions.

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  • Hierro, María & Maza, Adolfo, 2009. "Non-stationary transition matrices: An overlooked issue in intra-distribution dynamics," Economics Letters, Elsevier, vol. 103(2), pages 107-109, May.
    • Handle: RePEc:eee:ecolet:v:103:y:2009:i:2:p:107-109
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    Cited by:

    1. Seonyoung Park & Donggyun Shin, 2023. "Recent changes in the nature of the distribution dynamics of the US county incomes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(7), pages 1048-1067, November.
    2. María Hierro & Adolfo Maza, 2015. "From Discrete To Continuous-Time Transition Matrices In Intra-Distribution Dynamics Analysis: An Application To Per Capita Wealth In Europe," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 227-235, July.
    3. Tuomas Malinen, 2011. "Income Inequality and Savings: A Reassessment of the Relationship in Cointegrated Panels," DEGIT Conference Papers c016_076, DEGIT, Dynamics, Economic Growth, and International Trade.
    4. Park, Seonyoung & Shin, Donggyun, 2020. "Recent Changes in the Nature of Distribution Dynamics of US County Incomes," Working Paper Series 8075, Victoria University of Wellington, School of Economics and Finance.
    5. Margherita Gerolimetto & Stefano Magrini, 2017. "A Novel Look at Long-run Convergence Dynamics in the United States," International Regional Science Review, , vol. 40(3), pages 241-269, May.
    6. Tuomas, Malinen, 2011. "Inequality and savings: a reassesment of the relationship in cointegrated panels," MPRA Paper 33350, University Library of Munich, Germany.

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