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Using state indexes to define economic regions in the U.S

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  • Theodore M. Crone
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    Abstract

    When regional economists study the interaction of multi-state regions in the U.S., they typically use the regional divisions developed by the U.S. Bureau of the Census or the Bureau of Economic Analysis (BEA). The current census divisions were adopted in 1910 and divide the states into nine regional groups for the presentation of data. Since the 1950s, the BEA has grouped the states into eight regions based primarily on cross-sectional similarities in their socioeconomic characteristics. The BEA definition of regions is perhaps the most frequently used grouping of states for economic analysis. ; Since many economic studies of regions concentrate on similarities and differences in regional business cycles, it seems appropriate to group states into regions based on some common cyclical behavior. This paper explores the possibility of grouping states into regions based on common movements in state indexes of economic activity. These state indexes are variants of the coincident index developed by James Stock and Mark Watson for the U.S. economy. ; The author has applied cluster analysis to the monthly changes in these economic activity indexes to group the states into regions with similar business cycles. He has identified six distinct regions consisting of contiguous states with similar monthly changes in their economic activity indexes.

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    Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 99-19.

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    Date of creation: 1999
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    Handle: RePEc:fip:fedpwp:99-19

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    Keywords: Regional economics;

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    1. Gerald Carlino & Robert DeFina, 1993. "Regional income dynamics," Working Papers 93-1, Federal Reserve Bank of Philadelphia.
    2. Carlino, Gerald A. & Mills, Leonard, 1996. "Testing neoclassical convergence in regional incomes and earnings," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 565-590, December.
    3. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
    4. William N. Goetzmann & Susan M. Wachter, 1995. "Clustering Methods for Real Estate Portfolios," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(3), pages 271-310.
    5. Carlino, Gerald & Lang, Richard, 1989. "Interregional flows of funds as a measure of economic integration in the United States," Journal of Urban Economics, Elsevier, vol. 26(1), pages 20-29, July.
    6. Theodore M. Crone, 1994. "New indexes track the state of the states," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 19-31.
    7. Carlino, Gerald A. & Mills, Leonard O., 1993. "Are U.S. regional incomes converging? : A time series analysis," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 335-346, November.
    8. Leonard Mills, 1991. "Understanding national and regional housing trends," Business Review, Federal Reserve Bank of Philadelphia, issue Sep, pages 15-23.
    9. Gerald Carlino & Robert DeFina, 1994. "Does monetary policy have differential regional effects?," Working Papers 94-23, Federal Reserve Bank of Philadelphia.
    10. Gerald Carlino & Keith Sill, 1997. "Regional economies: separating trends from cycles," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 19-31.
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    Cited by:
    1. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Strategic Interaction and the Determination of Environmental Policy across U.S. States," Journal of Urban Economics, Elsevier, vol. 51(1), pages 101-122, January.
    2. Fredriksson, Per G. & Millimet, Daniel L., 2002. "Is there a 'California effect' in US environmental policymaking?," Regional Science and Urban Economics, Elsevier, vol. 32(6), pages 737-764, November.

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