Abstract
This paper considers some aspects of the dynamics of income distributions by employing a simple Markov chain model of income mobility. The main motivation of the paper is to introduce the techniques of “monotone” Markov chains to this field. The transition matrix of a discrete Markov chain is called monotone if each row stochastically dominates the row above it. It will be shown that by embedding the dynamics of the income distribution in a monotone Markov chain, a number of interesting results may be obtained in a straightforward and intuitive fashion.
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Thanks are due to Peter Lambert and four anonymous referees for very helpful comments.
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Dardanoni, V. Income distribution dynamics: monotone Markov chains make light work. Soc Choice Welfare 12, 181–192 (1995). https://doi.org/10.1007/BF00179833
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DOI: https://doi.org/10.1007/BF00179833