LONG RUN WEALTH CONVERGENCE CLUBS IN U.S. STATES: A STORY OF GROWTH RATES NOT LEVELS

Gregory Brock () and Vicente German-Soto ()
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Gregory Brock: Parker College of Business, U.S.A

Eurasian Journal of Social Sciences, 2024, vol. 12, issue 2, 66-81

Abstract: Whether convergence wealth clubs exist across U.S. states is the aim of this study with wealth being defined as either home equity or stock market holdings. Using the nonlinear econometric Phillips and Sul “log t test†method that permits multiple equilibria, overall wealth and stock market per capita wealth are found to β-converge in growth rates but not levels across a long period of time that includes the two main shocks to the U.S. economy since WWII. Per capita housing also exhibits convergence in growth rates but with several clubs of states that do not all converge and/or converge at quite different speeds. The control variables of per capita consumption and personal income converge in growth rates like convergence of Gross State Product found in the literature. More participation by households in the stock market, especially in states with low housing wealth is recommended to avoid lagging wealth levels in some states, especially in the middle class. As with per capita income, America is divided by wealth suggesting that if there were a new wealth tax it would fall disproportionally on a club of states but not all if the tax focused on housing wealth.

Keywords: Wealth Convergence; U.S. States; Home Equity; Stock Market Holdings; Multiple Equilibria (search for similar items in EconPapers)
Date: 2024
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