Kiel Working Papers, Kiel Institute for World Economics
No 1086:
Markov or Not Markov, This Should Be a Question
Frank Bickenbach and Eckhardt Bode
Abstract: Although it is well known that Markov process theory,
frequently applied in the literature on income convergence, imposes some
very restrictive assumptions upon the data generating process, these
assumptions have generally been taken for granted so far. The present paper
proposes, resp. recalls chi-square tests of the Markov property, of spatial
independence, and of homogeneity across time and space to assess the
reliability of estimated Markov transition matrices. As an illustration we
show that the evolution of the income distribution across the 48
coterminous U.S. states from 1929 to 2000 clearly has not followed a Markov
process.
Keywords: Convergence, Markov process, chi-square tests, U.S. regional growth; (follow links to similar papers)
JEL-Codes: C12; O40; R11; (follow links to similar papers)
28 pages, December 2001
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