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The Determinants of U. S. State Economic Growth: A Less Extreme Bounds Analysis

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Author Info
W. Robert Reed () (University of Canterbury)

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Abstract

This study investigates U.S. state economic growth from 1970-1999. I innovate on previous studies by developing a new approach for addressing "model uncertainty" issues associated with estimating growth equations. My approach borrows from the "extreme bounds analysis" (EBA) approach of Leamer (1985), while also addressing concerns raised by Granger and Uhlig (1990), Salai-Martin (1997) and others that not all specifications are equally likely to be true. I then apply this approach to identify "robust" determinants of state economic growth. My analysis confirms the importance of productivity characteristics of the labor force and industrial composition of a state's economy. I also find that policy variables such as (i) size and structure of government and (ii) taxation are "robust" and economically important determinants of state economic growth.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0605.pdf
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Publisher Info
Paper provided by University of Canterbury, Department of Economics in its series Working Papers in Economics with number 06/05.

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Length: 51 pages
Date of creation: 02 Feb 2006
Date of revision:
Handle: RePEc:cbt:econwp:06/05

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Web page: http://www.econ.canterbury.ac.nz
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Related research
Keywords: Growth; U. S. State Economic Growth; State Fiscal Policy; Economic Development; Taxes; Model Selection; SIC; AIC; AICc; Extreme Bounds Analysis;

Find related papers by JEL classification:
H10 - Public Economics - - Structure and Scope of Government - - - General
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
R58 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - Regional Development Policy
C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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    Other versions:
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  12. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2000-1), pages 125-236. [Downloadable!]
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  13. Reed, W. Robert, 2006. "Democrats, republicans, and taxes: Evidence that political parties matter," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 725-750, May. [Downloadable!] (restricted)
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  18. Leamer, Edward E, 1985. "Sensitivity Analyses Would Help," American Economic Review, American Economic Association, vol. 75(3), pages 308-13, June.
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  21. Yamarik, Steven, 2000. "Can tax policy help explain state-level macroeconomic growth?," Economics Letters, Elsevier, vol. 68(2), pages 211-215, August. [Downloadable!] (restricted)
  22. Gasper A. Garofalo & Steven Yamarik, 2002. "Regional Convergence: Evidence From A New State-By-State Capital Stock Series," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 316-323, May. [Downloadable!] (restricted)
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