Okun's Convergence within the U.S.

Abstract

This paper analyzes Okun’s law for the states of the U.S. over the period 1978-2002. By using Geographically Weighted Regression, possible geographical interactions across the analyzed states are taken into account. There is evidence of time-varying Okun’s coefficients in each state. Moreover, the empirical results are in favor of a convergence across the states in terms of Okun’s coefficients, thus of the phrase, “Okun’s convergence”. Finally, possible stability clubs for Okun’s coefficients are also investigated, and it is found that “Okun’s clusters” are also mostly geographical.

Keywords: Okun's Convergence, Geographically Weighted Regression, Regional Analysis, the U.S.

JEL Classification: E52, E58, F41