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Article
Testing Convergence in Income Distribution
Oxford Bulletin of Economics and Statistics (2009)
  • Yong Bao, Purdue University
  • Shatakshee Dhongde, Georgia Institute of Technology - Main Campus
Abstract
The generalized method of moments (GMM) estimator is often used to test for convergence in income distribution in a dynamic panel set-up. We argue that though consistent, the GMM estimator utilizes the sample observations inefficiently. We propose a simple ordinary least squares (OLS) estimator with more efficient use of sample information. Our Monte Carlo study shows that the GMM estimator can be very imprecise and severely biased in finite samples. In contrast, the OLS estimator overcomes these shortcomings.
Publication Date
April, 2009
Citation Information
Yong Bao and Shatakshee Dhongde. "Testing Convergence in Income Distribution" Oxford Bulletin of Economics and Statistics Vol. 71 Iss. 2 (2009)
Available at: http://works.bepress.com/shatakshee_dhongde/5/