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Amenities, local conditions and fiscal determinants of factor growth in rural America

  • Eric Thompson
  • George Hammond
  • Stephan Weiler

This paper examines how amenities, asset indicators, and fiscal factors influence the growth in factors of production from 1972 to 1999 in the 466 non-metropolitan labor market areas in the continental United States. In developing our model of non-metropolitan factor markets, we combine the emphasis of Brown et al. (2003) on the affect of taxes and public expenditure policy on labor and capital formation with the emphasis of Beeson et al. (2001) on the importance of climate and natural features on localized population growth. We develop our own measure of capital stock in non-metropolitan areas using data from the Census of Manufacturing for 1967, 1972, 1977, 1982, 1987, and 1992. Results indicate that local taxes discourage both employment growth and manufacturing capital formation, but that local public infrastructure investment and the level of local entrepreneurship encourages employment growth. Amenities such as a favorable climate and the presence of surface water encourage the growth of employment, and greater local wealth, as measured by dividend, interest, and rent income, encourages the formation of manufacturing capital stock. Results fail to support an “export base” approach for rural economies where greater manufacturing capital stock encourages greater employment in a region.

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File URL: http://www.kansascityfed.org/Publicat/Reswkpap/PDF/RWP06-08.pdf
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Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 06-08.

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Date of creation: 2006
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Handle: RePEc:fip:fedkrw:rwp06-08
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  1. Stephan Weiler, 2004. "Racing toward new frontiers : helping regions compete in the global marketplace," Main Street Economist, Federal Reserve Bank of Kansas City, issue Mar.
  2. Stephen P. A. Brown & Kathy J. Hayes & Lori L. Taylor, 2002. "State and local policy, factor markets and regional growth," Working Papers 0202, Federal Reserve Bank of Dallas.
  3. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August.
  4. Alicia H. Munnell, 1990. "Why has productivity growth declined? Productivity and public investment," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 3-22.
  5. Edward L. Glaeser & Jose A. Scheinkman & Andrei Shleifer, 1995. "Economic Growth in a Cross-Section of Cities," NBER Working Papers 5013, National Bureau of Economic Research, Inc.
  6. Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
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