Growth and Convergence across the US: Evidence from County-Level Data

Abstract

We use county data with 3,058 observations to study growth and convergence in the US. We assess the effect of 40 conditioning variables on the counties’ balanced growth paths. Using OLS and 3SLS-IV, the later yielding consistent estimates, we report estimates for the full sample and for metro, non-metro, and five regional samples. We find that (1) OLS yields convergence rates around 2 percent, but 3SLS yields 6–8 percent; (2) convergence rates vary across the U.S. E.g., Southern counties converge 2½ times faster than Northeastern counties; (3) government size at all levels (federal, state and local) is negatively correlated with growth; (4) the relation between educational attainment and growth is nonlinear; and (5) large finance, insurance and real estate industry, and entertainment industry is positively correlated with growth but the population share employed in education is negatively correlated with growth.Economic Growth, Convergence, Conditional Convergence, County- Level Data, 3SLS Instrumental Variables Estimate, Balanced Growth Path, Public Sector, Industry Composition, Educational Attainment