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Demand and Distribution in a Dynamic Spatial Panel Model for the United States: Evidence from State-Level Data

Author

Listed:
  • Gilberto Tadeu Lima
  • Andre M. Marques
Abstract
We estimate a modified demand-and-distribution system for the 48 contiguous US states and the District of Columbia (DC) employing spatial dynamic panel data for 1980–2019. We allow for endogenous regressors, test for the presence, significance, and magnitude of spatial spillovers, and estimate both immediate and cumulative effects on our endogenous variables of interest. Without testing for spatial dependence and spillovers, we estimate that output growth and capacity utilization in the sample US states and DC rise in response to an increase in their own wage share. Yet when we test for spatial dependence and spillovers as required by the state-level nature of the data, we estimate that a higher state wage share lowers output growth and capacity utilization in the own state, but raises output growth and capacity utilization in neighboring states. The former direct effect is larger (smaller) in absolute value than the latter indirect effect in the case of capacity utilization (output growth). Meanwhile, we find that a higher state output growth or capacity utilization reduces the wage share in the own state, but raises the wage share in neighboring states. The former direct effect is larger in absolute value than the latter indirect effect.

Suggested Citation

  • Gilberto Tadeu Lima & Andre M. Marques, 2022. "Demand and Distribution in a Dynamic Spatial Panel Model for the United States: Evidence from State-Level Data," Working Papers, Department of Economics 2022_21, University of São Paulo (FEA-USP), revised 05 Oct 2022.
    • Handle: RePEc:spa:wpaper:2022wpecon21
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    More about this item

    Keywords

    Wage share; output growth rate; capacity utilization; state-level economic activity; dynamic spatial panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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