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The long-term consequences of regional specialization

Michaels, Guy (2006) The long-term consequences of regional specialization. 766. Centre for Economic Performance, London, UK.

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Abstract

The Long-Term Consequences of Regional Specialization* What are the consequences of resource-based regional specialization, when it persists over a long period of time? While much of the literature argues that specialization is beneficial, recent work suggests it may be costly in the long run, due to economic or political reasons. I examine this question empirically, using exogenous geological variation in the location of subsurface oil in the Southern United States. I find that oil abundant counties are highly specialized: for many decades their mining sector was almost as large as their entire manufacturing sector. During the 1940s and 1950s, oil abundant counties enjoyed per capita income that was 20-30 percent higher than other nearby counties, and their workforce was better educated. But whereas in 1940 oil production crowded out agriculture, over the next 50 years it caused the oil abundant counties to develop a smaller manufacturing sector. This led to slower accumulation of human capital in the oil abundant counties, and to a narrowing of per capita income differentials to about 5 percentage points. Despite this caveat, the gains from specialization were large, and specialization had little impact on the fraction of total income spent by local government or on income inequality.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2007 Guy Michaels
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O18 - Regional, Urban, and Rural Analyses
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q33 - Resource Booms
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, and Changes
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O33 - Technological Change: Choices and Consequences; Diffusion Processes
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 766
Date Deposited: 31 Jan 2008
URL: http://eprints.lse.ac.uk/3274/

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