The Role of Industry Structure, Costs, and Economic Spillovers in Determining State Employment Growth Rates

We examine differential state employment growth by appraising the relative effects of traditional cost factors versus knowledge and technology spillovers. One emphasis is the influence that industry composition has on employment growth. Traditional cost factors examined include wage rates, unionization, taxes, and government policies such as unemployment insurance and welfare programs. The results suggest that industry composition does influence growth, working through several different avenues. In addition, taxes and other cost factors also significantly influence employment growth. Conversely, there was less evidence to suggest that knowledge spillovers play a significant role in determining state employment growth.