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Per-capita income gaps across US states and Canadian provinces

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  • Basher, Syed A.
  • Lagerlöf, Nils-Petter

Abstract

We propose that per-capita income gaps across US states and Canadian provinces can be explained by university education. Our ordinary least-squares regressions show university education having a robust positive and significant effect on per-capita incomes, when controlling for, e.g. taxes, unionization, government spending, and the sectoral composition of the economy. To control for endogeneity we instrument education today with different historical variables: population density in 1900, railway density in 1900, the sex ratio (men per woman) in 1900, and the fraction slaves in 1850. Our results support a causal link from education to incomes, and the hypothesis that these historical variables are valid instruments. We also find that the Canada dummy is mostly insignificant, and always positive.

Suggested Citation

  • Basher, Syed A. & Lagerlöf, Nils-Petter, 2008. "Per-capita income gaps across US states and Canadian provinces," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1173-1187, September.
  • Handle: RePEc:eee:jmacro:v:30:y:2008:i:3:p:1173-1187
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    Cited by:

    1. Acemoglu, Daron & García-Jimeno, Camilo & Robinson, James A., 2012. "Finding Eldorado: Slavery and long-run development in Colombia," Journal of Comparative Economics, Elsevier, vol. 40(4), pages 534-564.
    2. Joshua C. Hall & Dean Stansel & Danko Tarabar, 2015. "Economic Freedom Studies at the State Level: A Survey," Working Papers 15-07, Department of Economics, West Virginia University.
    3. Gregory Brock & Constantin Ogloblin, 2014. "Another look at technical efficiency in American states, 1979–2000," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(2), pages 577-590, September.
    4. Benos, Nikos & Karagiannis, Stelios & Karkalakos, Sotiris, 2015. "Proximity and growth spillovers in European regions: The role of geographical, economic and technological linkages," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 124-139.
    5. Daniel L. Bennet, 2016. "Subnational Economic Freedom and Performance in the United States and Canada," Cato Journal, Cato Journal, Cato Institute, vol. 36(1), pages 165-185, Winter.

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