LONG RUN WEALTH CONVERGENCE CLUBS IN U.S. STATES: A STORY OF GROWTH RATES NOT LEVELS

16 Pages Posted: 9 Jan 2025

See all articles by Gregory J. Brock

Gregory J. Brock

Georgia Southern University - Department of Economics

Vicente German-Soto

Autonomous University of Coahuila

Date Written: October 07, 2024

Abstract

Whether convergence wealth clubs exist across U.S. states is the aim of this study with wealth being defined as either home equity or stock market holdings. Using the nonlinear econometric Phillips and Sul "log t test" method that permits multiple equilibria, overall wealth and stock market per capita wealth are found to β-converge in growth rates but not levels across a long period of time that includes the two main shocks to the U.S. economy since WWII. Per capita housing also exhibits convergence in growth rates but with several clubs of states that do not all converge and/or converge at quite different speeds. The control variables of per capita consumption and personal income converge in growth rates like convergence of Gross State Product found in the literature. More participation by households in the stock market, especially in states with low housing wealth is recommended to avoid lagging wealth levels in some states, especially in the middle class. As with per capita income, America is divided by wealth suggesting that if there were a new wealth tax it would fall disproportionally on a club of states but not all if the tax focused on housing wealth.

Keywords: Wealth Convergence, U.S. States, Home Equity, Stock Market Holdings, Multiple Equilibria

Suggested Citation

Brock, Gregory and German-Soto, Vicente, LONG RUN WEALTH CONVERGENCE CLUBS IN U.S. STATES: A STORY OF GROWTH RATES NOT LEVELS (October 07, 2024). Available at SSRN: https://ssrn.com/abstract=5079265 or http://dx.doi.org/10.2139/ssrn.5079265

Gregory Brock (Contact Author)

Georgia Southern University - Department of Economics ( email )

P.O. Box 8153
Statesboro, GA 30460-8153
United States
912-478-5579 (Phone)

Vicente German-Soto

Autonomous University of Coahuila ( email )

Unidad Camporredondo,
Edificio "E", s/n
Saltillo, Coahuila 25280
Mexico
+528444128782 (Phone)
+528444102679 (Fax)

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