U.S. price convergence: Faster than expected

Zsolt Becsi and Olaniyi Ige

Economics Letters, 2025, vol. 255, issue C

Abstract: Trade predicts rapid U.S. price convergence, yet past studies report decade-long gaps. Using the Dynamic Common Correlated Effects (DCCE) estimator on 1963–2018 state-level GDP deflators, we find a 2.62-year half-life—far shorter than the uncorrected 9.98-year estimate. This result revises the prevailing narrative of sluggish convergence. Once national economic forces are accounted for, convergence is rapid and remarkably uniform across the country, with only minor and short-lived regional differences remaining. These findings suggest strong U.S. market integration and show that most apparent persistence in state prices is a statistical artifact of national shocks, not local barriers.

Keywords: Purchasing power parity; Regional price convergence; Cross-sectional dependence; Dynamic panel estimation (search for similar items in EconPapers)
JEL-codes: C31 E31 R11 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176525002939
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525002939

DOI: 10.1016/j.econlet.2025.112456

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().