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

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Abstract
This paper investigates whether the 48 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 contiguous 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.

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