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Endogenous Growth, Public Capital, and the Convergence of Regional Manufacturing Industries

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  • Charles R. Hulten
  • Robert M. Schwab

Abstract

Several explanations can be offered for the unbalanced growth of U.S. regional manufacturing industries in the decades after World War II. The convergence hypothesis suggests that the success of the South in catching up to the Northeast and Midwest should be understood by analogy with the economic success of Japan and the rest of the G-7 in closing the gap relative to the U.S. as a whole. Endogenous growth theory, on the other hand, assigns a central role to capital formation, broadly defined. A variant of endogenous growth theory focuses on investments in public infrastructure as a key determinant of regional growth. Finally, traditional location theory stresses the evolution of regional supply and demand and the role of economies of scale and agglomeration. This paper compares these alternative explanations of U.S. regional growth by testing their predictions about the productive efficiency of regional manufacturing industries. We find little evidence that technological convergence explains the regional evolution of U.S. manufacturing industry, or that endogenous growth was an important factor. We also find little evidence that public capital externalities played a significant role in explaining the relative success of industries in the South and West. The main engine of differential regional manufacturing growth over the period 1970-86 seems to be inter-regional flows of capital and labor. The growth of multifactor productivity is essentially uniform across regions, although there is some variation in the initial levels of efficiency.

Suggested Citation

  • Charles R. Hulten & Robert M. Schwab, 1993. "Endogenous Growth, Public Capital, and the Convergence of Regional Manufacturing Industries," NBER Working Papers 4538, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4538
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    Cited by:

    1. Bostic, Raphael W. & Gans, Joshua S. & Stern, Scott, 1997. "Urban Productivity and Factor Growth in the Late Nineteenth Century," Journal of Urban Economics, Elsevier, vol. 41(1), pages 38-55, January.
    2. Coronado, Julia Lynn, 1999. "Tax Exemption and State Capital Investment," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 473-82, September.
    3. McCunn, Alan & Huffman, Wallace E., 1998. "Convergence in U.S. TFP Growth for Agriculture: Implications of Interstate Research Spillovers for Funding Agricultural Research," ISU General Staff Papers 199808010700001304, Iowa State University, Department of Economics.
    4. Camilla Mastromarco & Ulrich Woitek, 2006. "Public Infrastructure Investment and Efficiency in Italian Regions," Journal of Productivity Analysis, Springer, vol. 25(1), pages 57-65, April.
    5. Inmaculada Álvarez Ayuso & Mª Jesús Delgado Rodríguez, 2004. "Infraestructuras de Transportes: Medición y Análisis de los Efectos Desbordamiento para los Sectores Productivos Españoles," Documentos de Trabajo del ICAE 0407, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    6. JosÈ Manuel Gonz·lez-P·ramo & Diego MartÌnez LÛpez, "undated". "Public Investment and Convergence in the Spanish Regions," Studies on the Spanish Economy 112, FEDEA.
    7. Massimiliano Agovino & Agnese Rapposelli, 2015. "Agglomeration externalities and technical efficiency in Italian regions," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(5), pages 1803-1822, September.
    8. Daniel Montolio & Albert Solé-Ollé, 2009. "Road investment and regional productivity growth: the effects of vehicle intensity and congestion," Papers in Regional Science, Wiley Blackwell, vol. 88(1), pages 99-118, March.
    9. Gonzalez-Paramo, Jose Manuel & Martinez, Diego, 2003. "Convergence across Spanish Regions: New Evidence on the Effects of Public Investment," The Review of Regional Studies, Southern Regional Science Association, vol. 33(2), pages 184-205.

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