Atlantic Economic Journal

, Volume 21, Issue 4, pp 39–54

A diffusion model of long-run state economic development

  • Dan M. Berry
  • David L. Kaserman

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.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Barro, R. J.; Sala-i-Martin, X. "Convergence,"Journal of Political Economy, 100, April 1992, pp. 223–51.CrossRefGoogle Scholar
  2. Bartik, T. J. "Business Location Decisions in the U.S.: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States,"Journal of Business and Economic Statistics, 3, January 1985, pp. 13–22.Google Scholar
  3. Benson, B.; Johnson, R. "The Lagged Impact of State and Local Taxes on Economic Activity and Political Behavior,"Economic Inquiry, 24, July 1986, pp. 389–401.Google Scholar
  4. Canto, V. A.; Webb, R. I. "The Effect of State Fiscal Policy on State Relative Economic Performance,"Southern Economic Journal, 54, July 1987, pp. 186–202.Google Scholar
  5. Carlton, D. W. "Why New Firms Locate Where They Do: An Econometric Model," in W. Wheaton, ed.,Interregional Movements and Regional Growth, Washington, D.C.: The Urban Institute, 1979, pp. 13–50.Google Scholar
  6. __ "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables,"Review of Economics and Statistics, 65, August 1983, pp. 440–9.Google Scholar
  7. Clark, D. P.; Kaserman, D. L.; Anantanasuwong, D. "A Diffusion Model of Industrial Sector Growth in Developing Economies,"World Development, 21, 1993, pp. 421–8.CrossRefGoogle Scholar
  8. David, P. A. "A Contribution to the Theory of Diffusion," Memorandum No. 71, Research Center in Economic Growth, Stanford University, 1969.Google Scholar
  9. Due, J. F. "Studies of State-Local Tax Influences on Location of Industry,"National Tax Journal, 13, June 1961, pp. 163–73.Google Scholar
  10. Fox, W. F.; Murray, M. N. "Local Public Policies and Interregional Business Development,"Southern Economic Journal, 57, October 1990, pp. 413–27.Google Scholar
  11. Griliches, Z. "Hybrid Corn: An Exploration in the Economics of Technological Change,"Econometrica, 24, October 1957, pp. 501–22.Google Scholar
  12. Lekvall, P.; Wahlbin, C. "A Study of Some Assumptions Underlying Innovation Diffusion Functions,"Swedish Journal of Economics, 75, 1973, pp. 362–77.Google Scholar
  13. Mansfield, E. "Technical Change and the Rate of Imitation,"Econometrica, 29, October 1961, pp. 741–66.Google Scholar
  14. Morgan, W. E.; Hackbart, M. M. "An Analysis of State and Local Industrial Tax Exemption Programs,"Southern Economic Journal, 41, October 1974, pp. 200–5.Google Scholar
  15. Nardinelli, C.; Wallace, M. S.; Warner, J. T. "Explaining Differences in State Growth: Catching Up versus Olson,"Public Choice, 52, 1987, pp. 201–13.CrossRefGoogle Scholar
  16. Newman, R. J. "Industry Migration and Growth in the South,"Review of Economics and Statistics, 65, February 1983, pp. 76–86.Google Scholar
  17. Papke, J. A.; Papke, L. E. "Measuring Differential State-Local Tax Liabilities and Their Implications for Business Investment Location,"National Tax Journal, 39, September 1986, pp. 357–66.Google Scholar
  18. Plaut, T. R.; Pluta, J. E. "Business Climate, Taxes, and Expenditures, and State Industrial Growth in the U.S."Southern Economic Journal, 50, July 1983, pp. 99–119.Google Scholar
  19. Quan, N. T.; Beck, J. H. "Public Education Expenditures and State Economic Growth: Northeast and Sunbelt Regions,"Southern Economic Journal, 54, October 1987, pp. 361–76.Google Scholar
  20. Romans, T.; Subrahmanyam, G. "State and Local Taxes, Transfers, and Regional Economic Growth,"Southern Economic Journal, 46, October 1979, pp. 435–44.Google Scholar
  21. Schmenner, R. W.Making Business Location Decisions, Englewood Cliffs, NJ: Prentice-Hall, 1982.Google Scholar
  22. Tax Foundation, Inc.Facts and Figures on Government Finance, New York: Tax Foundation various issues.Google Scholar
  23. U.S. Bureau of the Census.Statistical Abstract of the United States, Washington, DC: GPO, various issues.Google Scholar
  24. __.Survey of Current Business, various issues. Washington, DC: GPO.Google Scholar
  25. U.S. Department of Agriculture, Rural Electrification Administration.Annual Statistical Report, Rural Electric Borrowers, various issues, Washington, DC: GPO.Google Scholar
  26. U.S. Department of Energy, Energy Information Administration,Statistics of Privately Owned Electric Utilities in the U.S., 1979, Washington, DC: GPO, 1980.Google Scholar
  27. __.Statistics of Publicly Owned Electric Utilities in the U.S., 1979, Washington, DC: GPO, 1980.Google Scholar
  28. Wasylenko, M.; McGuire, T. "Jobs and Taxes: The Effect of Business Climate on States' Employment Growth Rates,"National Tax Journal, 38, December 1985, pp. 497–511.Google Scholar
  29. Yu, W.; Wallace, M. S.; Nardinelli, C. "State Growth Rates: Taxes, Spending, and Catching Up,"Public Finance Quarterly, 19, January 1991, pp. 80–93.Google Scholar

Copyright information

© Atlantic Economic Society 1993

Authors and Affiliations

  • Dan M. Berry
    • 1
  • David L. Kaserman
    • 2
  1. 1.New York State Department of Public ServiceUSA
  2. 2.Auburn UniversityUSA

Personalised recommendations