Okun’s Convergence within the U.S.

HAKAN YILMAZKUDAY, VANDERBILT UNIVERSITY

Abstract

This paper analyzes the 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 for 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”. The estimated convergence speeds are mostly geographical. Finally, possible clubs for Okun’s coefficients are investigated, and it is found that “Okun’s clusters” are also mostly geographical.