, Volume 21, Issue 4, pp 39-54

A diffusion model of long-run state economic development

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Abstract

Most empirical studies of state economic development have been relatively short-term in nature. Here, we examine the causes of growth over a more substantial period of time covering almost six decades. Particular emphasis is placed on the so-called convergence hypothesis. A two-stage methodology originally employed to model the diffusion of new technologies is applied. Results tend to confirm the general convergence of state per capita incomes over time. That is, a large share of the observed variation in state economic growth is explained by initial period incomes, with lower income states growing relatively more rapidly. In addition, we find that low taxes and comparatively strong support for higher education foster more rapid growth.