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U.S. price convergence: Faster than expected

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  • Becsi, Zsolt
  • Ige, Olaniyi

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.

Suggested Citation

  • Becsi, Zsolt & Ige, Olaniyi, 2025. "U.S. price convergence: Faster than expected," Economics Letters, Elsevier, vol. 255(C).
    • Handle: RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525002939
    DOI: 10.1016/j.econlet.2025.112456
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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