Inequality convergence revisited: Evidence from stationarity panel tests with breaks and cross correlation

摘要

This paper empirically examines whether there exists stochastic convergence of income inequality among 48 contiguous states within the US over the 1916-2005 period. For that purpose, we employ the recently devel oped panel stationarity test of Carrion-i-Silvestre, Del Barrio-Castro and Lopez-Bazo (2005), which assumes a highly flexible trend function by incorporating an unknown number of structural breaks. In addition, the is sues of cross-sectional dependence as well as control for finite-sample bias are accommodated through boot strap methods. Overall, for the US case, our analysis provides strong evidence in support of the hypothesis of inter-state inequality convergence. Moreover, the results are robust to alternative inequality measures ap plied, different notions of stochastic convergence defined, and alternative panel stationary test employed.