Question

Why would you expect real GDP per capita in California and Pennsylvania to exhibit convergence but not in California and Baja California, a state of Mexico that borders the United States? What changes would allow California and Baja California to converge?

Short answer

What changes could allow for convergence between California and Baja California? Answer: Convergence of real GDP per capita between California and Pennsylvania might occur due to their similar institutional structures, economic policies, and access to resources and technology within the United States. In contrast, California and Baja California have different legal systems, economic policies, and levels of economic development, making convergence less likely. To achieve convergence between California and Baja California, changes such as increased economic integration, improved education systems, higher investment in R&D, and better infrastructure could help both regions become more economically and socially similar.

Step-by-step solution

Convergence is an economic term that refers to the rate at which countries, states, or regions come closer in terms of income and economic development. When two areas have converging real GDP per capita, it means that their economies are becoming more similar in terms of productivity and living standards. Generally, convergence occurs when there are similarities in institutions, technology, human capital, and economic policies. #Step 2: Compare California and Pennsylvania#

California and Pennsylvania are both states within the United States with similar institutional structures, economic policies, and access to resources and technology. This means that they share a common legal and regulatory framework, have access to similar educational systems, and can take advantage of national research and development (R&D) investments. As a result, there is a higher likelihood of convergence in their real GDP per capita over time. #Step 3: Compare California and Baja California#

On the other hand, California and Baja California are in two different countries, with different legal systems, economic policies, and levels of economic development. Baja California, being a part of Mexico, may have different priorities in terms of public expenditure and might not have the same level of access to the same advanced technology or quality education as California. Factors such as lower government spending on R&D, differences in infrastructure, and lower economic integration make convergence between these two regions less likely. #Step 4: Changes for convergence between California and Baja California#

In order for California and Baja California to exhibit convergence, a few changes would need to occur. These might include: 1. Economic Integration: Increasing cross-border trade, investment, and cooperation could foster convergence in real GDP per capita by allowing both regions to benefit from each other's economic strengths. 2. Improve Education: Enhancing educational systems and opportunities in Baja California would contribute to a more skilled workforce, making them more competitive and able to attract high-quality industries and jobs. 3. Increase Investment in R&D: Investing more in research and development would help Baja California adopt new technologies and innovations faster, leading to increased productivity. 4. Implement Better Infrastructure: Improving transportation, communication, and digital infrastructure within Baja California would facilitate better economic exchanges between the two economies. By implementing these changes, California and Baja California could work toward converging their real GDP per capita and becoming more economically and socially similar.