Regional Implications of the Great Recession

This paper investigates the effects of the Great Recession on state output, tracking the size of lost output and the recovery time using quarterly real Gross State Product (GSP) for 2007-2013. This paper defines two different measures of the Okun Gap, one relative to the state GSP level at the beginning of the recession and another relative to the forecast state GSP level. The initial analysis of the data shows substantial variation among the states for both definitions of the Okun Gap. Regressions of the Okun Gap on education, employment in construction and government, the state foreclosure rate, and regional dummy variables were estimated. The foreclosure rate had a significant negative role in each state’s gap performance; the industry variables did not test significant. Education attainment showed mixed results. The regional fixed effects variables provide limited understanding, with only the Plains region testing significant