2003
DOI: 10.1177/0160017603253789
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Evaluating the Markov Property in Studies of Economic Convergence

Abstract: Markov chain theory, which has frequently been applied to analyze income convergence, imposes restrictive assumptions on the data-generating process. In most empirical studies, it is taken for granted that per capita income follows a stationary first-order Markov process. To examine the reliability of estimated Markov transition matrices, the authors propose Pearson X2 and likelihood ratio tests of the Markov property, spatial independence, and homogeneity over time and space. As an illustration, it is shown t… Show more

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Cited by 123 publications
(97 citation statements)
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“…However, as mentioned in Bickenbach and Bode (2001), this property often turns out to be a too-restrictive assumption, which is hardly fulfilled by the actual data-generating processes. Moreover, the respective χ 2 -based parametric tests for the validity of the assumption of time-homogeneity may turn out to have very poor small sample properties (Bickenbach and Bode 2003). Thus, it is not surprising that, in such a case, more and more researchers are deciding to drop the extremely restrictive assumption of time-homogeneity and follow alternative research scenarios.…”
Section: Figmentioning
confidence: 99%
“…However, as mentioned in Bickenbach and Bode (2001), this property often turns out to be a too-restrictive assumption, which is hardly fulfilled by the actual data-generating processes. Moreover, the respective χ 2 -based parametric tests for the validity of the assumption of time-homogeneity may turn out to have very poor small sample properties (Bickenbach and Bode 2003). Thus, it is not surprising that, in such a case, more and more researchers are deciding to drop the extremely restrictive assumption of time-homogeneity and follow alternative research scenarios.…”
Section: Figmentioning
confidence: 99%
“…Thus, since the elements on the diagonal have values above 0.2, the results show a moderate persistence of prots. However, we nd a stronger persistence in the low and high prot classes, where the transition probability is around 0.4 (Bickenbach and Bode 2003).…”
Section: Datamentioning
confidence: 58%
“…Taking into account the structure of our data, it is reasonable to dene ve, equally sized groups so as to meet the requirements of the Markov process: (1) the least protable rms; (2) low protable rms; (3) protable rms; (4) high protable rms; and (5) the most protable rms. Accordingly, the rst and second groups comprise companies with low 10 A similar technique is developed in Quah (1996), Bickenbach and Bode (2003), Ces (2003) and Geppert and Stephan (2008). prot rates, while the fourth and the fth classes are rms that have above-average prot.…”
Section: Datamentioning
confidence: 99%
“…. , M z , with entries m ij (t), a simple χ 2 -distributed test criterion for the feasibility of pooling data is given by (Bickenbach and Bode, 2003;Billingsley, 1961) …”
Section: The Projection Modelmentioning
confidence: 99%