Regional Convergence: Evidence from a New State-by-State Capital Stock Series

Abstract

This paper seeks to reconcile the growth empirics technique of Mankiw, Romer, and Weil (1992) with the empirical results of Barro and Sala-“i-Martin (1991) through the development of a new database covering the 1977-96 period. We create state-by-state capital stock and gross investment estimates by apportioning the national capital stock among the states. Using these estimates along with gross state product and employment data, we find evidence that the Solow growth model explains state-wide growth during this period. We consistently find a rate of convergence of around 2%. Our results, as a consequence, suggest that the empirical results of Barro and Sala-í-Martin are driven by the neoclassical growth process of Solow.

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