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

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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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Bibliographic Info

Paper provided by University of Canterbury, Department of Economics and Finance 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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Related research

Keywords: Growth; U. S. State Economic Growth; State Fiscal Policy; Economic Development; Taxes; Model Selection; SIC; AIC; AICc; Extreme Bounds Analysis;

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Cited by:
  1. Norman Gemmell & Richard Kneller & Ismael Sanz, 2011. "The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, vol. 121(550), pages F33-F58, February.
  2. Nivedita Mukherji & Jonathan Silberman, 2011. "Idea generation: the performance of U.S. States 1997–2007," The Journal of Technology Transfer, Springer, vol. 36(4), pages 417-447, August.
  3. Norman Baldwin & Stephen Borrelli, 2008. "Education and economic growth in the United States: cross-national applications for an intra-national path analysis," Policy Sciences, Springer, vol. 41(3), pages 183-204, September.
  4. James Aim & Janet Rogers, 2011. "Do State Fiscal Policies Affect State Economic Growth?," Public Finance Review, , vol. 39(4), pages 483-526, July.

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