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

Maria Hierro and Adolfo Maza

Economics Letters, 2009, vol. 103, issue 2, 107-109

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.

Keywords: Transition; matrix; Stationarity; Chapman-Kolmogorov; equation (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:103:y:2009:i:2:p:107-109

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