Intertemporal and Interspatial Productivity Differentials in U.S. Manufacturing

This study analyzes the role productivity plays in explaining the variation in regional manufacturing growth rates. Using the neoclassical growth accounting procedure, we measure productivity from an intertemporal and interspatial perspective. Previous regional studies of U.S. manufacturing look only at the contribution of intertemporal productivity growth in explaining regional growth. These studies ignore the level of productivity and its effect on regional growth. For each year of our study, we rank regional by their interspatial productivity index. We find little difference between the productivity growth rates among the regions of the North and South. Differences among the regions emerge only when we consider interspatial productivity differentials. The North's level of factor productivity is 25 to 30 percent higher than the South's. The absolute productivity disadvantage of the Suoth, however, is offset by its low input prices. Thus, it is the cost advantage of the South and not its productivity advantage that explains the region's relatively high growth rate.