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Comparisons of stationary distributions of linear models

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  • Zhu, Shenghao

Abstract

In this note, I compare stationary distributions of the linear model Xn+1=anXn+bn, where an and bn are non-negative random variables. I show that an increase of the variability of an and/or bn causes a less equal stationary distribution in terms of the Lorenz dominance. The result is useful in studies of wealth and income distributions.

Suggested Citation

  • Zhu, Shenghao, 2013. "Comparisons of stationary distributions of linear models," Economics Letters, Elsevier, vol. 119(2), pages 221-223.
    • Handle: RePEc:eee:ecolet:v:119:y:2013:i:2:p:221-223
    DOI: 10.1016/j.econlet.2013.02.024
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    References listed on IDEAS

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    1. Jess Benhabib & Alberto Bisin & Shenghao Zhu, 2011. "The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents," Econometrica, Econometric Society, vol. 79(1), pages 123-157, January.
    2. Efe A. Ok, . "Probability Theory with Economic Applications," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr11.
    3. Gastwirth, Joseph L, 1971. "A General Definition of the Lorenz Curve," Econometrica, Econometric Society, vol. 39(6), pages 1037-1039, November.
    4. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-1189, December.
    5. Davies, James B, 1986. "Does Redistribution Reduce Inequality?," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 538-559, October.
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    Cited by:

    1. Di Pietro, Christian & Sorge, Marco M., 2018. "Comparing inequality and mobility in linear models: Comment," Economics Letters, Elsevier, vol. 172(C), pages 56-58.
    2. Peng, Baochun, 2018. "Comparing inequality and mobility in linear models," Economics Letters, Elsevier, vol. 168(C), pages 155-157.
    3. Christian Di Pietro & Mariafortuna Pietroluongo & Marco M. Sorge, 2023. "Stochastic Ordering of Stationary Distributions of Linear Recurrences: Further Results and Economic Applications," Economies, MDPI, vol. 11(4), pages 1-10, April.

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    More about this item

    Keywords

    Comparisons; Lorenz dominance; Stationary distributions; Linear models;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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