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Heterogeneity in Convergence Rates and Income Determination across U.S. States: Evidence from County-Level Data

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Author Info
Andrew Young (Emory)
Matthew Higgins (Emory)
Daniel Levy (Bar-Ilan & Emory)

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Abstract

We utilize county-level data to explore growth determination in the U.S. and possible heterogeneity in growth determination across individual states. The data includes over 3,000 cross-sectional observations and 39 demographic control variables. We use a consistent two stage least squares estimation procedure. (We report OLS estimates as well.) The estimated convergence rate across the U.S. is about 7 percent per year – higher than the 2 percent normally found with OLS in cross-country, U.S. state, and European region samples. Estimated convergence rates for 32 individual states are above 2 percent with an average of 8.1 percent. For 29 states the convergence rate is above 2 percent with 95 percent confidence. For seven states the convergence rate can be rejected as identical to at least one other state’s convergence rate with 95 percent confidence. In examining the determinants of balanced growth path heights, we find that government at all levels of decentralization is negatively correlated with economic growth. Educational attainment of a population has a non-linear relationship with economic growth according to our estimates: growth is positively related to high-school degree attainment, seemingly unrelated to obtaining some college education, and then positively related to four-year degree or more attainment. Also, finance, insurance and real estate industry and entertainment industry are positively correlated with growth, while education industry is negatively correlated with growth. Heterogeneity in the effects of balanced growth path determinants across individual states is much harder to detect (or dismiss) than in convergence rates.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0402003.

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Length: 54 pages
Date of creation: 05 Feb 2004
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Handle: RePEc:wpa:wuwpdc:0402003

Note: Type of Document - pdf; prepared on Win 98; to print on Any printer; pages: 54 ; figures: Figures are included
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Related research
Keywords: Convergence Heterogeneity Neoclassical Growth Model 2SLS Consistent Estimate Income Determination Variation in Convergence Rate County Data Balanced Growth Path Government and Economic Growth Education and Economic Growth

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General
L80 - Industrial Organization - - Industry Studies: Services - - - General
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
R50 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - General

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Andrew Young & Matthew Higgins & Daniel Levy, 2005. "Sigma-Convergence Versus Beta-Convergence: Evidence from U.S. County-Level Data," Macroeconomics 0505008, EconWPA. [Downloadable!]
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