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

Charles R. Hulten, Robert M. Schwab

NBER Working Paper No. 4538
Issued in November 1993
NBER Program(s):   PR

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.

download in pdf format
   (313 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4538

Published: Published as "Public Capital Formation and the Growth of Regional Manufacturing Industries", NTJ, Vol. 45, no. 4 (1992): 121-134.

Users who downloaded this paper also downloaded these:
Barro w2588 Government Spending in a Simple Model of Endogenous Growth
Holtz-Eakin w4122 Public-Sector Capital and the Productivity Puzzle
Nadiri and Mamuneas w3887 The Effects of Public Infrastructure and R&D Capital on the Cost Structure and Performance of U.S. Manufacturing Industries
Hulten w5847 Infrastructure Capital and Economic Growth: How Well You Use It May Be More Important Than How Much You Have
McCallum w5844 Neoclassical vs. Endogenous Growth Analysis: An Overview
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us