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Erschienen in:

20.08.2020

Income convergence across the U.S. states: further evidence from new recent data

verfasst von: Rati Ram

Erschienen in: Journal of Economics and Finance | Ausgabe 2/2021

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Abstract

Noting the analytical and empirical significance of the topic, this research revisits the theme of income convergence across the US states. The work fills several gaps in the existing literature by (a) covering the most recent period 1997–2018, (b) using the official data on real GDP per capita compiled by the US Bureau of Economic Analysis (BEA), (c) explicitly comparing the convergence scenario for 1997–2018 with that for 1977–1997, and (d) placing the observed patterns in the context of Piketty-like propositions about high returns to capital and increasing income inequality. One significant outcome of the exercise is an indication of sigma-divergence across the US states, as reflected in increased standard deviation of logs and coefficient of variation over the period, which correspond to a highly significant positive trend in both. Lack of significant beta-convergence is also of interest as is the contrast in the convergence patterns for 1977–1997 and 1997–2018. A simple explanation for income-divergence is pursued by studying the pattern of changes in K/L ratios across states from 2000 to 2015, and it is found that, contrary to the expected pattern of resource flows, K/L ratio tended to increase more in the high K/L-ratio states than in the low K/L areas. This divergence in K/L ratio underlies the sigma-divergence in income. The observed pattern may be deemed consistent with Piketty-like propositions about the high and increasing returns to capital which impeded its move to the poorer states with low K/L ratio.

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Fußnoten
1
Besides other researchers, Islam (2003, p. 309) explains this point.
 
2
Islam (2003) provides a fine exposition of the cross-country research.
 
3
Barro and Sala-i-Martin (2004, p. 472) restate the main conclusion “that the U.S. states tend to converge at a speed of about 2% per year”.
 
4
BEA (2017) explains construction of real GDP per capita for US states in greater detail.
 
5
It is usual to do the analysis for the 48 contiguous states which are likely to have a homogeneous structure. For example, besides other researchers, Barro and Sala-i-Martin (2004, pp. 469, 473) worked with the 48 contiguous states.
 
6
The discussion of increased inequality has been pervasive for several years. Piketty (2017) is a widely-discussed treatise on the topic.
 
7
Additiona details about the K/L ratios are available from the author.
 
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Metadaten
Titel
Income convergence across the U.S. states: further evidence from new recent data
verfasst von
Rati Ram
Publikationsdatum
20.08.2020
Verlag
Springer US
Erschienen in
Journal of Economics and Finance / Ausgabe 2/2021
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-020-09520-w

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