Determinants of state labor productivity: The changing role of density

This study examines the determinants of state labor productivity during the 1989 to 2000 period. Using the model developed by Carlino and Voith (1992), we estimate how state characteristics such as population density, education, industrial structure, and business amenities (such as crime rates), influence state labor productivity. We also estimate our model over two sub-periods (1989 to 1995 and 1996 to 2000) in order to isolate the labor productivity boom of the late 1990s. Our aggregate results for the full 1989 to 2000 period were consistent with previous research. However, the determinants of labor productivity changed during the productivity boom of the late 1990s. During the period 1996 to 2000 greater industrial diversity appeared to have stimulated labor productivity, whereas in the earlier period, 1989 to 1995, specialization promoted labor productivity. Finally, while population density contributed to labor productivity during the earlier period, population density proved not to be a statistically significant determinant of labor productivity during the period 1996 to 2000.