A MATCHED PAIRS ANALYSIS OF STATE GROWTH DIFFERENCES

Authors

  • BRIAN GOFF,

    1. Goff: Department of Economics/Ford College of Business, Western Kentucky University, Bowling Green, KY 42101. Phone 270-745-2249, Fax 270-745-3190, E-mail brian.goff@wku.edu
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  • ALEX LEBEDINSKY,

    1. Lebedinsky: Department of Economics/Ford College of Business, Western Kentucky University, Bowling Green, KY 42101. Phone 270-745-2249, Fax 270-745-3190, E-mail alex.lebedinsky@wku.edu
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  • STEPHEN LILE

    1. Lile: Department of Economics/Ford College of Business, Western Kentucky University, Bowling Green, KY 42101. Phone 270-745-2249, Fax 270-745-3190, E-mail steve.lile@wku.edu
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    • The authors thank Bob Tollison, Dennis Wilson, and participants on panels at the Southern Economic Association Meetings and Academy of Economics and Finance Meetings, an anonymous referee, and the editor for useful comments and suggestions.


Abstract

The American states have provided a rich laboratory in which to examine influences on economic growth, physical capital, human capital, and a variety of policy variables. Existing studies typically use broad cross sections of all states or particular regional subsamples. Pairwise matching is an alternative design for better controlling of omitted variables. We estimate a growth model of U.S. states for 1997–2005 before and after applying different pairwise matching techniques. Our results indicate that sample estimates based on pairwise matching substantially improve the overall ability of the growth model to identify the growth-enhancing effects of lower tax burdens in general and lower individual income-tax rates in particular. These effects are more pronounced with narrower matching criteria. (JEL H00, C29, O40)

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