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Stochastic convergence analysis of US state economic freedom sub‐components: Evidence from unit root tests for bounded processes

Stochastic convergence analysis of US state economic freedom sub‐components: Evidence from unit... This study tests for convergence of the three main sub‐components of economic freedom (government spending, taxation, and labor market freedom) for the 50 US states from 1981 to 2019. In particular, we test for stochastic convergence using unit root tests that account for structural breaks and bounded processes. By controlling for these sources of parameter instability, we find limited evidence in favor of stochastic convergence across the three sub‐components of economic freedom. However, we find more evidence of stochastic convergence with respect to the sub‐components than in the case of the overall economic freedom at the US state level. Our results highlight the distinct nature of the institutional quality across states as represented by government spending, taxation, and labor market freedom. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The American Journal of Economics and Sociology Wiley

Stochastic convergence analysis of US state economic freedom sub‐components: Evidence from unit root tests for bounded processes

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Publisher
Wiley
Copyright
Copyright © 2023 American Journal of Economics and Sociology
ISSN
0002-9246
eISSN
1536-7150
DOI
10.1111/ajes.12509
Publisher site
See Article on Publisher Site

Abstract

This study tests for convergence of the three main sub‐components of economic freedom (government spending, taxation, and labor market freedom) for the 50 US states from 1981 to 2019. In particular, we test for stochastic convergence using unit root tests that account for structural breaks and bounded processes. By controlling for these sources of parameter instability, we find limited evidence in favor of stochastic convergence across the three sub‐components of economic freedom. However, we find more evidence of stochastic convergence with respect to the sub‐components than in the case of the overall economic freedom at the US state level. Our results highlight the distinct nature of the institutional quality across states as represented by government spending, taxation, and labor market freedom.

Journal

The American Journal of Economics and Sociology – Wiley

Published: Mar 26, 2023

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