Club convergence of per capita disposable income in the United States

This paper examines the long-run trends in per-capita income across the US states (1995–2018). Contrary to the majority of the literature on income convergence, which uses pre-tax income as the variable of reference, we focus on per-capita disposable household income. This enables us to better identify any convergence pattern. We apply the Phillips and Sul (2007, 2009) convergence methodology to check the existence of club convergence across the United States and within the Bureau of Economic Analysis (BEA) regions. Our findings confirm the club convergence hypothesis and highlight the role of tax policy in reducing regional disparities.