Do Economies Converge? Evidence from a Panel of U.S. States

Paul Evans and Georgios Karras

The Review of Economics and Statistics, 1996, vol. 78, issue 3, 384-88

Abstract: This paper investigates whether the forty-eight contiguous U.S. states converge and, if so, whether convergence is absolute. Economies are shown to converge if, and only if, technology is stationary around a common trend. If convergence does occur, it is unlikely to be absolute unless the economy fixed effects in technology, capital's share, and the rental rate vanish. Examining data on the level of technology, capital's share, and the rental rate provides strong evidence that the continuous U.S. states converge rapidly to levels that are far apart. The rapidity of convergence suggests that factors and technology are highly mobile across the contiguous U.S. states. Copyright 1996 by MIT Press.

Date: 1996
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