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The effect of industrial diversity on state unemployment rate and per capita income

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  • Oded Izraeli
  • Kevin J. Murphy
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    Abstract

    This paper examines the effect of industrial diversification on state unemployment and per capita income. Diversification may provide a form of employment insurance to states during cyclic downturns. Thus well diversified states should experience lower unemployment. To the extent that specialization confers economic benefit, however, more concentrated states should have higher per capita personal income. We use two sets of panel data for seventeen states spanning a thirty-eight year period to test these hypotheses. When state heterogeneity is controlled for properly, our results show that a strong link exists between industrial diversity and reduced unemployment. The evidence that per capita personal income is associated with industrial concentration is much weaker. Copyright Springer-Verlag Berlin Heidelberg 2003

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    File URL: http://hdl.handle.net/10.1007/s001680200100
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    Bibliographic Info

    Article provided by Springer in its journal The Annals of Regional Science.

    Volume (Year): 37 (2003)
    Issue (Month): 1 (02)
    Pages: 1-14

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    Handle: RePEc:spr:anresc:v:37:y:2003:i:1:p:1-14

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    Keywords: JEL classification: R23; J6;

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    Cited by:
    1. Hakan Berument & Nukhet Dogan & Aysit Tansel, 2008. "Macroeconomic Policy and Unemployment by Economic Activity: Evidence from Turkey," ERC Working Papers 0803, ERC - Economic Research Center, Middle East Technical University, revised Apr 2008.
    2. Koen Frenken & Frank G. van Oort & Thijs Verburg & Ron A. Boschma, 2004. "Variety and regional economic growth in the Netherlands," Papers in Evolutionary Economic Geography (PEEG) 0502, Utrecht University, Section of Economic Geography, revised Dec 2004.
    3. Gnidchenko, Andrey, 2010. "Defragmentation of Economic Growth with a Focus on Diversification: Evidence from Russian Economy," MPRA Paper 27113, University Library of Munich, Germany.
    4. Enrico Marelli & Roberto Patuelli & Marcello Signorelli, 2012. "Regional unemployment in the EU before and after the global crisis," Post-Communist Economies, Taylor & Francis Journals, vol. 24(2), pages 155-175, January.
    5. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.
    6. Keizo Mizuno & Fumitoshi Mizutani & Noriyoshi Nakayama, 2006. "Industrial diversity and metropolitan unemployment rate," The Annals of Regional Science, Springer, vol. 40(1), pages 157-172, March.
    7. Fu, Shihe & Dong, Xiaofang & Chai, Guojun, 2008. "Industry specialization, diversification, churning, and unemployment in Chinese cities," MPRA Paper 15339, University Library of Munich, Germany.
    8. Shu-hen Chiang, 2009. "The effects of industrial diversification on regional unemployment in Taiwan: is the portfolio theory applicable?," The Annals of Regional Science, Springer, vol. 43(4), pages 947-962, December.
    9. Claudia M. Buch & Martin Schlotter, 2008. "Regional Origins of Employment Volatility: Evidence from German States," CESifo Working Paper Series 2296, CESifo Group Munich.
    10. André Mollick, 2008. "What explains unemployment in US–Mexican border cities?," The Annals of Regional Science, Springer, vol. 42(1), pages 169-182, March.

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