Determining the Differences that Matter: Development and Divergence in US States Over 1850-2010

44 Pages Posted: 29 Aug 2018

See all articles by Penny Mealy

Penny Mealy

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; University of Oxford - Smith School of Enterprise and the Environment; Bennett Institute for Public Policy

J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School; Santa Fe Institute

Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS)

Date Written: May 18, 2018

Abstract

Understanding the differences between rich and poor places is complicated by the fact that places differ from each other in numerous ways. In this paper, we show how a dimension reduction algorithm can unveil hidden patterns in US census data and consistently yield useful insights into the type of economic activities that separate rich and poor states over 160 years of development history. Moreover, we find this approach has a unique ability to shed light on the dynamics of evolving landscapes and changes in relevance of particular types of activities, such as the shift from manufacturing to high skill services that occurred in the US over the last 40 years. Our results have important implications for the decline of the rustbelt and the reversal of US regional income convergence from 1980 onwards.

Keywords: regional development, structural change, economic complexity, rustbelt, economic growth

JEL Classification: R11, R12, O10, O14, O47, J24,

Suggested Citation

Mealy, Penny and Farmer, J. Doyne and Hausmann, Ricardo, Determining the Differences that Matter: Development and Divergence in US States Over 1850-2010 (May 18, 2018). HKS Working Paper No. RWP18-030. Available at SSRN: https://ssrn.com/abstract=3235193 or http://dx.doi.org/10.2139/ssrn.3235193

Penny Mealy (Contact Author)

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

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University of Oxford - Smith School of Enterprise and the Environment ( email )

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J. Doyne Farmer

University of Oxford - Institute for New Economic Thinking at the Oxford Martin School ( email )

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Oxford, OX2 6ED
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Ricardo Hausmann

Harvard University - Harvard Kennedy School (HKS) ( email )

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HOME PAGE: http://www.hks.harvard.edu/about/faculty-staff-directory/ricardo-hausmann

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