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The convergence dynamics of economic freedom across U.S. states |
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| Authors: | James E Payne James W Saunoris Saban Nazlioglu Cagin Karul |
| Institution: | 1. Woody L. Hunt College of Business, Paul L. Foster and Alejandra de la Vega Foster Distinguished Chair in International Business and Research Fellow of the Hunt Institute for Global Competitiveness, The University of Texas at El Paso, El Paso, Texas, USA;2. Department of Economics, Eastern Michigan University, Ypsilanti, Michigan, USA;3. Department of International Trade and Finance, Pamukkale University, Denizli, Turkey
Department of Economics and Finance, Nisantasi University, Istanbul, Turkey;4. Department of Econometrics, Pamukkale University, Denizli, Turkey |
| Abstract: | This study tests for convergence in economic freedom across the 50 U.S. states from 1981 to 2019. In particular, we test for stochastic convergence in overall economic freedom using unit root tests that account for structural breaks and bounded processes, two sources of parameter instability. We find limited evidence of stochastic convergence. Further analysis of relative (club) convergence and weak σ-convergence rejects the presence of overall convergence in the panel of the U.S. states, but the emergence of two convergence clubs with respect to state-level economic freedom. The logit analysis of the determinants of the convergence clubs reveals that more prosperous states and states with a higher initial level of economic freedom have a higher probability of being in the club with more economic freedom. However, more racially diverse states have a lower probability of being in the club with more economic freedom. |
| Keywords: | bounded unit roots club convergence economic freedom stochastic convergence structural breaks weak σ-convergence |