Convergence of labor productivity across the US states

Most studies of labor productivity convergence among US states base their analyses on state-level GDP per worker. Such aggregated analysis may hide important information about the role of sectors, and changes in the sectoral composition of these economies, in explaining economy-wide convergence results. Using highly disaggregated data for the period 1987–2015 from the US Bureau of Economic Analysis, we examine sectoral unconditional convergence in labor productivity in the US states. Our results demonstrate a general slowing down in the rate of convergence of labor productivity in the latter years of this period. The sectoral analysis also indicates that manufacturing was the primary driver of convergence during the 1987–1997 period, which had the highest rate of convergence; the role of this sector, however, has diminished in recent years. Several factors—such as the decline in interstate migration, rising housing costs in major cities, agglomeration, and structural changes in the US economy that have reduced the role of manufacturing—may have contributed to the rise in the labor productivity differential among US states.     

Exploring the dynamics of the shadow economy across US states

This article examines the dynamics of the shadow economy using data for 50 US states over the period 1998–2008. Using a panel VAR model, we analyse the impulse response of the shadow economy to an orthogonal shock in capital tax rates, educational attainment, union participation and gross state product. We find evidence of significant dynamics underlying the relationship between the shadow economy and its determinants. The results remain robust to alternate measures of the determinants of the shadow economy, alternate causal ordering of the variables in the system and conditioning on the level of income in each state.     

Convergence of per capita sulphur dioxide emissions across US states

This study examines the stochastic conditional convergence of sulphur dioxide (SO₂) emissions using the Residual Augmented Least Squares–Lagrange Multiplier (RALS–LM) unit root test with structural breaks. This procedure allows the data to account for trend breaks and nonnormal errors that have been ignored or deemphasized in previous studies. The study finds that per capita sulphur dioxide emissions exhibits stochastic conditional convergence across US states.     

Analyzing occupational licensing among the states

The study provides new evidence of the influence of occupational regulations on the U.S. economy. Our analysis, unlike previous studies, was able to obtain a representative sample of the population at the state level, which allowed us to estimate the cross-sectional effects of occupational licensing for each state. The state-level analysis demonstrates considerable variation in percentage of the workforce that has attained a license, and unlike minimum wages or unionization, licensing shows no regional patterns in the distribution of occupational licensing. The analysis also shows considerable variation in the influence of licensing on earnings across the states. The national estimates suggest that occupational licensing raises wages by about 11% after controlling for human capital and other observable characteristics. Finally, our analysis shows the influence of occupational regulation on wage inequality across the income distribution.     

Analyzing skilled and unskilled labor efficiencies in the US

In this paper, I analyze the time paths of the efficiencies of skilled and unskilled labor in a production framework where skilled and unskilled labor are imperfect substitutes. Their implications for economic growth and wage inequality in the US between 1950 and 2005 present two main findings. First, although skilled labor efficiency has a strong upward trend, I find no evidence of acceleration in its growth rate to support the common view that there has been an acceleration in the new skilled-biased technologies. Second, beginning around 1970, there has been a decline in the absolute level of the efficiency of unskilled labor, implying that the decline has played a significant role in the overall productivity slowdown and the substantial widening in the US wage structure.     

Judicial independence and economic freedom in the US states

This article addresses the extent to which differences in judicial independence across US states influence economic freedom by using the Fraser Institute’s Economic Freedom of North America Index. Overall, the results suggest that, as judicial independence increases within a state’s court of last resort, so does a state’s overall economic freedom score, along with each of the subcomponent index scores. These findings add important nuances to the literature and provide opportunities for future research.     

Convergence in price levels across US cities

This paper empirically tests for convergence in consumer price indices across 17 major cities in US over the 1918-2008 period. By using the novel OLS estimator introduced by Bao, Y., Dhongde, S., 2009. Testing convergence in income distribution. Oxford Bulletin of Economics and Statistics 71, 295-302, we find overwhelming evidences in support of price level convergence over time.     

Analyzing the effects of US monetary policy shocks in dollarized countries

Identifying monetary policy shocks is difficult. Therefore, instead of trying to do this perfectly, this paper exploits a natural setting that reduces the consequences of shock misidentification. It does so by basing conclusions upon the responses of variables in three dollarized countries (Ecuador, El Salvador, and Panama). They import US monetary policy just as genuine US states do, but have the advantage that non-monetary US shocks are not imported perfectly. Consequently, this setting reduces the effects of any mistakenly included non-monetary US shocks, while leaving the effects of true monetary shocks unaffected. Results suggest that prices fall after monetary contractions; output does not show a clear response.     

The macroeconomic effects of fiscal rules in the US states

Fiscal policy restrictions are often criticized for limiting the ability of governments to react to business cycle fluctuations and, consequently, the adoption of quantitative restrictions is viewed as inevitably leading to increased macroeconomic volatility. In this paper, we use data from 48 US states to investigate how budget rules affect fiscal policy outcomes. Our key findings are that (1) strict budgetary restrictions lead to lower policy volatility (i.e. less aggressive use of discretion in conducting fiscal policy) and (2) fiscal restrictions reduce the responsiveness of fiscal policy to output shocks. These two results should have opposite effects on output volatility. While less discretion should reduce volatility, less responsiveness of fiscal policy might amplify business cycles. We provide empirical support for the first effect: restrictions, by reducing discretion in fiscal policy, can reduce macroeconomic volatility.     

Spatial dependence in constitutional constraints: the case of US states

Several theories suggest that states?? choices of constitutional rules are at least partially a function of neighboring constitutions. This paper provides the first analysis of spatial dependence of specific provisions within state constitutions in the United States. The analysis effectively makes constitutional rules endogenous, contributing to a relatively underdeveloped branch of constitutional economics. By employing a series of probit estimations of nineteen specific constitutional rules, I find evidence of spatial dependence in state constitutions. Specifically, the presence of specific constitutional constraints pertaining to term limits, supreme court justice selection, recall, home rule, direct democracy, constitutional amendment by convention, balanced budget requirements, tax and expenditure limits, line item veto, victims?? bill of rights, health and welfare, right to privacy, environmental protection, sex discrimination, abortion, and official language all exhibit some evidence spatial dependence.     

Spatial effects of foreign direct investment in US states

Abstract This paper estimates the aggregate productivity effects of Marshallian externalities generated by foreign direct investment (FDI) in US states, controlling for Marshallian externalities and other spatial spillovers generated by domestic firms. A regional production function framework models externalities and other spatial spillovers explicitly as determinants of total factor productivity. We employ a system generalized method of moments (GMM) estimator to account for the potential endogeneity of FDI and the presence of spatial lags. Using data for US states from 1977–2003, the results indicate that FDI generates positive externalities, while externalities from domestic firms are negative.     

Highway Spending and Induced Vehicle Emissions: Evidence from the US states

This paper investigates the impact of state and local government highway spending on vehicle emissions. A theoretical framework is constructed to show the effect of government highway spending on passenger and freight vehicle emissions and decompose the effect into a rebound effect, an induced demand effect and an interaction effect. We then develop an empirical strategy and combine state-level data in the US to test the induced CO2 emissions by government highway spending. We find that there are positive and significant total effects of government highway spending on passenger and freight vehicle emissions. The magnitude of these effects, however, significantly differs from one another as the elasticity of freight vehicle emissions with respect to government highway spending is four times larger than that in the passenger sector. The difference can be plausibly explained by the rebound effect and the interaction effect. We argue that policies regarding government spending on highway projects, especially those relying on cost-benefit analysis, should account for the potential difference in induced environmental impacts between passenger and freight vehicles.     

Transitions across labor market states including formal/informal division in Egypt

This study examines the worker transitions across labor market states including formal/informal division using panel data of 2006 to 2012 from Egypt. We generate a broad set of facts about labor market dynamics in Egypt. We first develop transition probabilities by gender across different labor market states including formal/informal sectors utilizing Markov transition processes. Government employment is the most persistent labor market state for both men and women and the out of labor force is the second most persistent labor market state for women. Unemployment is the most mobile labor market state. Informal private wage work and self‐employed–agriculture are also relatively mobile labor market states. We next identify the effects of individual, household and job characteristics on different mobility patterns by estimating multinomial logit models. We find that gender, age, education, experience, and several sectors of economic activity are associated with the transition probabilities between the labor market states considered such as formal wage, informal wage, self‐employment, unemployment, government employment, and out of labor market. Education, in particular, university degree or above is noted to play a vital role in the probability of transitions across several labor market states.     

Tax efficiency in selected Indian states

This paper attempts to measure pure tax efficiency of fifteen major Indian states (Andhra Pradesh, Assam, Bihar, Haryana, Gujarat, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamilnadu, Uttar Pradesh and West Bengal) for the period 1980–81 to 1992–93 in a manner that allows this efficiency to vary both across time as well as across states. It is discovered that there is a moral hazard problem in the design of central grants in that higher grants by the central government to the state governments reduce efficiency of tax collection by these states. The less poor states are more efficient in tax collection. The rankings of states by tax efficiency for the various years do not converge. An index of aggregate tax efficiency is calculated and it appears that this index has been stagnating. It is argued that the weight placed on tax effort in the formula determining central grants to state governments should be increased to improve tax efficiency of state governments. First version received: November 1997/final version received: November 1998     

Economic resilience in times of public health shock: The case of the US states

Does adopting social distancing policies amid a health crisis, e.g., COVID-19, hurt economies? Using a machine learning approach at the intermediate stage, we applied a generalized synthetic control method to answer this question. We utilize state policy response differences. Cross-validation, a machine learning approach, is used to produce the “counterfactual” for adopting states—how they “would have behaved” without lockdown orders. We categorize states with social distancing as the treatment group and those without as the control. We employ the state time-period for fixed effects, adjusting for selection bias and endogeneity. We find significant and intuitively explicable impacts on some states, such as West Virginia, but none at the aggregate level, suggesting that social distancing may not affect the entire economy. Our work implies a resilience index utilizing the magnitude and significance of the social distancing measures to rank the states' resilience. These findings help governments and businesses better prepare for shocks.     

Segmented stochastic convergence across the G-7 countries

This paper analyzes the stochastic convergence in per capita income levels among the current G-7 over the period 1900–89. We show that, in the presence of possible structural breaks, the strong condition of stationary pair-wise differences between per capita GDP holds in more cases than previously supposed. However, convergence occurs more frequently in the first part of the time sample than in the second one. First version received: June 1999 / Final version accepted: Feb. 2000     

Estimating productivity and returns to scale in the US textile industry

In light of the textile industry's growing foreign competition, trade deficit and job loss, we estimate its productivity and efficiency for the period 1975–93 utilizing a variable elasticity of substitution production function. The results indicate that, despite job losses, the industry adjusted by increasing labor productivity and maintaining fairly stable profits. This performance does not warrant protectionist policies. However, with an elasticity of factor substitution less than one and decreasing, the impact of factor price increases could result in higher apparel prices and preference for cheaper imports. Furthermore, with an elasticity of capital output rapidly decreasing, significant technological improvements will be required to improve competitiveness since textile production is capital intensive. Recently revised rules on trade liberalization could increase competition in the industry. First version received: October 1999/Final version received: August 2000     

Can oil shocks explain asymmetries in the US Business Cycle?

We consider whether oil prices can account for business cycle asymmetries. We test for asymmetries based on the Markov switching autoregressive model popularized by Hamilton (1989), using the tests devised by Clements and Krolzig (2000). We find evidence against the conventional wisdom that recessions are more violent than expansions: while some part of the downturn in economic activity that characterises recessionary periods can be attributed to dramatic changes in the price of oil, post-War US economic growth is characterized by the steepness of expansions. First Version Received: December 2000/Final Version Received: September 2001     

Battleground states and voter participation in US presidential elections: an empirical test

The winner-take-all method of allocating Electoral College votes (in 48 of the 50 states) in US presidential elections has promoted interesting behaviours by politicians and states that are evident throughout US (economic) history. This analysis explores the impact that being a ‘battleground state’ in presidential elections has on future voter participation rates. After quantifying the degree to which each state is a battleground state, the empirical analysis proffers what it refers to as the ‘battleground voting hypothesis’, which argues that the greater the degree to which a given state is a battleground state, the greater the expected benefits from voting in that state and hence the greater the voter turnout in that state. The empirical results suggest that the top-to-bottom ‘battleground state effect’ generated an average of 7.8 additional percentage points in voter participation in presidential elections over the period 1964–2008 for those states at the top of the scale.