Effects of State Income on Regional Growth at the County Levels in the US

The paper empirically investigates effects of state income levels on economic growth of US counties in order to support a theoretical explanation for hindering regional growth based on efficiency wages theories. The study briefly reviews the related literature and then runs cross-section growth regressions for local counties by using data for 3061 counties in 50 US states for the period of 1982-2006. The analysis mainly finds an adverse relationship of state income with county growth, which is in line with the EU evidence reported by Kim (2015). This effect is found to be weaker than the effect observed for the period before the IT crash. It is also shown that a rise in state income tends to enhance county convergence within states in contrast to the EU evidence. Such main findings contribute to providing new evidence of an adverse effect of state average income in line with the previous EU evidence, which give a lesson for the US and industrialized countries experiencing economic growth with widening regional inequality. For future research, it would be meaningful to examine such effect for regions in Korea that recently faces with widening income inequality too.