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State and local policy, factor markets and regional growth

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  • Stephen P. A. Brown
  • Kathy J. Hayes
  • Lori L. Taylor

Abstract

A large and growing literature to explain how state and local policies affect factor markets, firm location and economic growth has developed in three distinct threads. These threads have variously emphasized how policy and natural amenities affect regional economic growth or firm location; how variations in policy and natural amenities can lead to persistent wage differentials across regions; and how regional variation in factor inputs, including public capital, affects output. In this article, we expand the modeling framework of Roback and Gyourko and Tracy to integrate these threads into a single inquiry about how state and local policies—including the provision public capital—affects factor markets and economic growth. Using the model as the basis for estimation, we find that state and local policies have a more profound influence on the private capital-to-labor ratio in a region than on private output. Furthermore, the evidence suggests that the growth of government—either in the form of services or public capital—discourages private sector growth.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 0202.

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Date of creation: 2002
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Handle: RePEc:fip:feddwp:0202

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Keywords: Regional economics;

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  1. David Aschauer, 1988. "Is public expenditure productive?," Staff Memoranda 88-7, Federal Reserve Bank of Chicago.
  2. Timothy J. Bartik, 2002. "The Effects of Environmental Regulation on Business Location in the United States," Book chapters authored by Upjohn Institute researchers, in: Wayne B. Gray (ed.), Economic Costs and Consequences of Environmental Regulation, pages 129-151 W.E. Upjohn Institute for Employment Research.
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Cited by:
  1. Eric Thompson & George Hammond & Stephan Weiler, 2006. "Amenities, local conditions and fiscal determinants of factor growth in rural America," Research Working Paper RWP 06-08, Federal Reserve Bank of Kansas City.
  2. McPhail, Joseph E. & Orazem, Peter & Singh, Rajesh, 2010. "The Poverty of States: Do State Tax Policies Affect State Labor Productivity?," Staff General Research Papers 31552, Iowa State University, Department of Economics.
  3. McDonald, Bruce D. & Miller, D. Ryan, 2010. "Welfare programs and the state economy," Journal of Policy Modeling, Elsevier, vol. 32(6), pages 719-732, November.
  4. Partridge, Mark D. & Rickman, Dan S., 2012. "Integrating regional economic development analysis and land use economics," MPRA Paper 38291, University Library of Munich, Germany.
  5. Thompson, Eric C., 2007. "Measuring the Impact of Tourism on Rural Development: An Econometric Approach," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 37(2).
  6. Decker, Christopher S. & Thompson, Eric C. & Wohar, Mark E., 2009. "Determinants of State Labor Productivity: The Changing Role of Density," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(1).

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