stochastic convergence in regional economic activity随机收敛在地区经济活动.pdf

Journal of Mathematical Finance, 2011, 1, 125-131 doi:10.4236/jmf.2011.13016 Published Online November 2011 (http://www.SciRP.org/journal/jmf) Stochastic Convergence in Regional Economic Activity Fariba Hashemi Swiss Federal Institute of Technology, Lausanne, Switzerland E-mail : Fariba.Hashemi@epfl.ch Received August 11, 2011; revised September 21, 2011; accepted October 5, 2011 Abstract A stochastic model is presented, based on a double process of temporal drift and random disturbance, to fit the evolution of cross-country distribution of income and economic activity. Instead of assuming a steady state as is standard practice, a long run stationary equilibrium distribution is hypothesized, around which econo- mic activity fluctuates. An empirical application comparing dynamics of growth in Asia and Europe tests the validity of the proposed method. In particular, results point out that the distribution of income and economic activity is approaching a long run equilibrium at a faster rate in the case of Asia, and that the dispersion of the distribution is shrinking over time above all in the case of Europe. Main implications are supportive of the convergence hypothesis, and suggest that diffusion may be a potential technique for the analysis of growth dynamics. Keywords: Dynamics of Growth, Stochastic Processes 1. Introduction gress of Romer [4] and Aghion et al. [5]. In his classic Contribution to the Theory of Economic Growth [3], So- The study is motivated by the observation that early leaders low proposed that we study economic growth by assum- in industrial revolution like the UK and the Netherlands