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Productivity in the Twelfth District



Labor productivity, that is, real output per worker (or per worker hour), is a primary determinant of our long-run standard of living. More output per worker translates into higher profits, higher wages, or lower prices—or a combination of the three. Therefore, understanding why labor productivity is higher in one firm (or city, state, nation, industry, etc.) than another is of vital importance.This Economic Letter looks at the levels of output per worker in the Twelfth District, with an emphasis on California, compared to that of the rest of the nation and discusses the possible causes of regional differences in labor productivity. Productivity in the Twelfth District vs. the rest of the nation To see how Twelfth District states compare to the rest of the nation, I examine state-level data on real value-added (output) per worker.The valueadded measure is inflation-adjusted Gross State Product (GSP), which is the state counterpart to the nation’s GDP.The most recent data on GSP are for 2000. Six of the District’s nine states are in the top 40 % of all states in terms of the level of output per worker in 2000.Alaska leads the nation, largely due to the prevalence of a few industries with very high valueadded per worker (as well as high capital per worker), such as pipelines and extraction of oil and natural gas.Washington and Oregon also rank fairly high on the list, at 10 th and 21 st place, respectively (both above the national average). California, the largest District state, ranks sixth in the nation in labor productivity. Figure 1 shows that, despite the high output per worker in some other District states, on the whole, the rest of the District has had a much smaller productivity advantage relative to the nation than California has had. Moreover, California’s advantage has been persistent, whereas the advantage of the rest of the District is quite recent

Year: 2002
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