Convergence Amid Divergence in a Region

Abstract

The convergence hypothesis from neoclassical growth theory is examined for per capita incomes of counties within a large subnational region, the Great Plans. Convergence of the β and σ varieties are considered. The former describes the tendency for economies with low per capita incomes in an initial period to grow faster than those with higher incomes. The latter describes the tendency for the dispersion of incomes to fall over time and eventually stabilize. Total per capita incomes across the region show a β convergence speed over the past quarter century roughly equal to that found for activity measures in previous analyses of nation groups, continental regions, and states of the U.S. As concerns σ convergence, the dispersion of total per capita incomes in the region stabilized during the past decade. However, when transfer payments and dividends, interest, and rents are deducted from income, β convergence speeds drop markedly and the dispersion of incomes rises over the study period.