Real Income convergence Across states Assignment

Real Income convergence Across states - Assignment Example Real Income convergence Across states The countries or states with poor economies experience increased levels on returns as compared to the rich economy states, a fact attributable to the diminishing returns to capital. Analyzing the neoclassical model on an international platform, it becomes noticeable that the effect of convergence is strengthened by both technological and capital outflow from rich economies to poor and, outflow of labor to rich economies from the poor ones. In ascertain whether real personal disposable incomes were converging to a certain constant value, we formulated our null hypothesis such that: Ho: there is income convergence across states (unit root exists for income series) H1: There is no income convergence across states (no unit root for income series and thus it`s stationary) Previous empirical analysis focused on the increase of per capita income and the production level of the U.S. states (Shekhar, 115). Extensive studies have been undertaken on the analysis of the data regarding the personal income from the 1840s and on the cumulative produce of the state dating back from 1963. For analyzing purposes on what determines the growth of the states’ economy, the familiarity with the U.S. states acts as representation of resources that are not properly utilized: basically, there exists information on the 48 states for a period of more than a century.