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On the Robustness of the Twin-Peaked Ergodic Distribution of Income Across Countries
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Abstract
In the literature on convergence, the simple Markov chain model indicates evolution towards a twin-peaked world. Although cleansing the ergodic distribution of income across countries of short-run noise reinforces its twin-peaked shape, these twin peaks are not statistically significant. Moreover, the specific type high immobility reflected by the data on income renders the estimated transition matrix particularly prone to the generation of twin-peaked ergodic distributions.