In this research, we apply a stochastic convergence test for 13 regional
incomes in Korea from 1985-2009 developed by Carrion-i-Silvestre et al.
(2005), which has the advantage of considering multiple structural breaks and
the presence of cross-section dependence. Following Quah(1993, 1997), we
also use the distribution dynamics approach including the stochastic kernel,
and its 3-dimentional surface plots and 2-dimentional contour plots to analyse
growth dynamics in regional incomes.
We find significant structural breaks around the Asian financial crisis of
1997. Hence, most regions were impacted by common shocks from global
events, indicating cross-sectional dependence. Non-rejection of stationarity
provides evidence for stochastic convergence in 13 regional incomes. The
results show that after the Asian financial crisis per capita income distribution
shows a tendency towards polarization and convergence club.