A prerequisite for meaningful state economic performance comparisons: Adjusting for population density

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The Annals of Regional Science


This paper examines labor productivity across the lower 48 states from 1993 to 2000, a period that coincides considerably with the longest economic expansion, as chronicled by the National Bureau of Economic Research to date. Our results suggest that states with high education levels, high population density, and low tax burden tend to have high labor productivity. Further analysis shows that differences in population density account for the largest share of the differences in labor productivity across states. Since population density is not generally considered a policy variable for most states, more meaningful state economic performance comparisons can be made by taking into consideration differences in state population densities. These findings should be of interest to economic development organizations and policy makers because labor productivity is the primary source of wages in the long run.


Both co-authors are Senior Research Associates in the University of Southern Maine's Center for Business and Economic Research, Maine’s EDA University Center serving the public and private sectors.