A REEXAMINATION OF THE NEOCLASSICAL THEORY OF REGIONAL GROWTH USING DISAGGREGATE INDUSTRY DATA

The processes which determine the economic growth and development of subnational geographic units continue to be a major focus of research in the field of regional economics. To date, research efforts in regional growth have fallen into four main categories: regional econometric model building, the shift-share/export-base approach (which is fundamentally industrial structure analysis), growth-pole agglomeration studies, and neoclassical growth theory, which emphasizes the movement of productive factors in search of increasing returns. The principal focus of this research is on neoclassical growth theory. In particular, a supply oriented, neoclassical model is constructed along lines first suggested by George Borts in his seminal 1960 study of aggregate manufacturing growth. This model proposes a relationship between the rate of growth of returns to factors of production in a given region and the initial level of factor payments. According to the model, factor returns should be observed to be growing faster in regions where they were initially lowest, and growing more slowly in regions where they were initially relatively higher. The implication for regional growth research is that factors of production, such as capital and labor, will tend to migrate in search of higher returns allowing regional economists to anticipate the direction and magnitude of factor movements. The present research is an extension of the Borts line of inquiry, but using more highly disaggregated three-digit industry data. To this end, a series of hypotheses, similar to those suggested by Borts, are derived and tested based on the neoclassical model. A sample of eighteen three-digit industries are examined with respect to each hypothesis, and results are reported. The results suggest several specific conclusions regarding the process of regional economic growth: first, that returns to factors of production have a predictable and demonstrable relation to their relative intensities in a given industry; second, that factor payments tend to grow faster in areas where they were initially low, and slower where they were initially high, and third, that factor payments appear to exhibit a pattern of spatial convergence among regions within the population of industries studied