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Specification and Testing of Markov Chain Models: An Application to Convergence in the European Union
Author(s) -
Fingleton Bernard
Publication year - 1997
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00072
Subject(s) - markov chain , convergence (economics) , per capita , economics , econometrics , european union , range (aeronautics) , macroeconomics , international economics , statistics , mathematics , population , materials science , demography , sociology , composite material
Recently Markov chains have been used to analyze the convergence properties of national and regional per capita incomes. This paper highlights their applicability and importance for economists and illustrates some of the potential pitfalls associated with this approach. The empirical conclusions, based on data for the period 1975 to 1993, are that the regions of the EU appear to be converging to a form of equilibrium characterized by stable proportions of economies at a range of output per capita levels, and by a permanent chance of mobility between all levels, consistent with the existence of multiple steady‐states across countries.