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An alternative perspective on the stochastic convergence of incomes in the United States

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  • Steven Cook

Abstract

In recent years a number of studies has examined the potential stochastic convergence of incomes in the United States. This research has been based upon examination of the order of integration of the ratios of regional levels of per-capita income relative to US aggregate per-capita income, with stationary of the ratios taken as evidence of stochastic convergence. In the present article this research and its implicit assumption that the individual regional and aggregate per-capita series are I(1), are revisited. In a departure from previous research, application of a more robust testing procedure incorporating two structural breaks to the individual aggregate and regional per-capita series, rather than their ratios, is seen to result in overwhelming rejection of the unit root hypothesis for all of the series examined. The unit root hypothesis is rejected also for more disaggregated State level data. The evidence of stationarity presented for the component per-capita income series suggests that care should be exercised when both interpreting results presented previously in the literature and conducting further research.

Suggested Citation

  • Steven Cook, 2008. "An alternative perspective on the stochastic convergence of incomes in the United States," Applied Economics Letters, Taylor & Francis Journals, vol. 15(12), pages 929-934.
  • Handle: RePEc:taf:apeclt:v:15:y:2008:i:12:p:929-934
    DOI: 10.1080/13504850600949186
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    References listed on IDEAS

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    1. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
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    Cited by:

    1. Herrerias, M.J. & Ordoñez, J., 2012. "New evidence on the role of regional clusters and convergence in China (1952–2008)," China Economic Review, Elsevier, vol. 23(4), pages 1120-1133.
    2. Connaughton, John E. & Swartz, Caroline, 2015. "Changes in State PCPI Rankings," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(1).
    3. Burcu Ozcan, 2014. "Does Income Converge among EU Member Countries following the Post-War Period? Evidence from the PANKPSS Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 22-38, October.

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