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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)

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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Bibliographic Info

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
Date of revision:
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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Web page: http://128.118.178.162

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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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References

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Cited by:
  1. Andrew T. Young & Matthew J. Higgins & Daniel Levy, 2008. "Sigma Convergence versus Beta Convergence: Evidence from U.S. County-Level Data," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 40(5), pages 1083-1093, 08.

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