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ABSTRACTThis paper examines the sources of regional convergence in per capita incomes over the last four decades. Growth in per capita income is decomposed into two major components: (1) growth in employment rates and (2) growth in wage rates per worker. Using annual data from the Bureau of Economic Analysis and the Bureau of Labor Statistics, the paper finds that the observed convergence in per capita incomes of sates was largely due to convergence in employment rates; wage rates either did not converge or did so weakly. Employing an instrumental variables technique, the paper finds that rapid growth in the work force with relatively low levels of human capital in initially poor states was a depressing influence on wage rate growth in these states, and was a major reason for the relatively slow convergence in per capita incomes.

Indonesia per capita income tends to increase during 2013 – 2016. It indicates that Indonesian people are able to achieve welfare improvement. This research aims to analyze the effects of inflation, Human Development Index (HDI), population, Gross Regional Domestic Product (GRDP) growth, Minimum Wage, and technology utilization on per capita income in Indonesia. It becomes a reference for local economic policies at local governments in Indonesia. The estimation model uses panel data under the Fixed Effects Model (FEM). FEM is chosen based on the Chow and Hausman test. This research uses time series from 2013 – 2016 and cross-section of 34 provinces in Indonesia. The findings show that inflation and GRDP have a significant effect on per capita income with negative direction, while HDI and minimum wage have a significant effect with positive direction, whereas population and technology utilization for workers do not have a significant effect. The coefficient of determination (Adjusted R2) is about 0.999754. It means that 99.975% of the dependent variable is explained by the variation of the independent variables. The implication of policies, namely: a) the local governments should control the inflation rate; b) the local governments should increase the domestic investment in health, education, and accessibility; and c) the local governments should promote technology utilization to the workers.

AbstractThis paper quantitatively explores the role of demand in explaining the positive correlation between an importer's per capita income and the extensive margin of bilateral trade. The theoretical mechanism is based on agents that increase the set of goods they consume with income. This affects the structure of a country's import demand and therewith the extensive margin of trade. We formalize this intuition by incorporating preferences that allow for binding non‐negativity constraints into an otherwise standard Ricardian multi‐country model. We quantify the model and find that the behaviour of the model's extensive margin of trade is consistent with the data.