IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

A Time Series Test of Regional Convergence in the USA with Dynamic Panel Models, 1972-1998

  • Sedgley, N.

    ()

  • Elmslie, B.
Registered author(s):

    A good deal of controversy surrounds the empirical regularity of convergence. If capital’s share is taken to be 1/3, as in national accounts, then convergence should occur at a much faster rate than observed. Problems are worse if the economy is open. With perfect capital mobility convergence should occur at an infinite rate. Convergence estimates appear to be as slow for state economies as for national economies, even though the assumption of perfect capital mobility is a closer approximation of reality for these economies. Some argue that other variables, most prominently human capital, must be included in any cross sectional estimation of convergence. Supposedly, this addition of variables can bring the implied rate of convergence in line with empirical estimates by controlling for differences in the steady state level of per capita income. This paper extends the analysis of Islam (1995) to US states by estimating dynamic panel data models. This is a more appropriate method of allowing for different steady states. We find that the data suggests states converge very quickly, implying a high degree of capital mobility, if each state economy is allowed to have its own steady state captured through its own fixed effect. These results demonstrate the pitfalls of applying closed economy models to study growth in very open economies and the dangers of adding variables to the estimation which have, at best, only a weak relationship to differential steady states.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.usc.es/economet/reviews/eers421.pdf
    Download Restriction: No

    Article provided by Euro-American Association of Economic Development in its journal Regional and Sectoral Economic Studies.

    Volume (Year): 4 (2004)
    Issue (Month): 2 ()
    Pages:

    as
    in new window

    Handle: RePEc:eaa:eerese:v:4:y2004:i:4_8
    Contact details of provider: Web page: http://www.usc.es/economet/eaa.htm

    Order Information: Web: http://www.usc.es/economet/info.htm Email:


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Cohen, Daniel & Sachs, Jeffrey, 1986. "Growth and external debt under risk of debt repudiation," European Economic Review, Elsevier, vol. 30(3), pages 529-560, June.
    2. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    3. Holtz-Eakin, Douglas, 1993. "Solow and States: Capital Accumulation, Productivity, and Economic Growth," National Tax Journal, National Tax Association, vol. 46(4), pages 425-39, December.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eaa:eerese:v:4:y2004:i:4_8. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (M. Carmen Guisan)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.