CAPITAL DYNAMICS AND REGIONAL DEVELOPMENT

This thesis investigates the process of capital accumulation in the economic development of the U.S. regions over the period 1954-1976. It is based on the analysis of a recently developed set of annual capital stock time series data by state for total manufacturing and four individual industries (textiles, apparel, fabricated metals, electrical and electronic equipment). A spatial and temporal descriptive analysis examines state and regional capital growth rates, the changing spatial distribution of capital stock over time, and the short-run volatility of capital accumulation in particular states. A Box-Jenkins analysis of state net investment time series reveals considerable spatial diversity of experience, both within and between industries. A simple cumulative-causative model is found to be an inadequate description of the regional capital formation process; nor do the trends witnessed conform to the catastrophe paradigm of other recent regional growth models.

An explanatory analysis of the determinants of regional capital accumulation successfully employs an accelerator-type relationship in which recent past regional profit levels and changes outperform simple output measures as determinants of net regional investment. In contrast to the cumulative causation scenario, the previously existing regional capital stock is found to exhibit a negative influence on subsequent regional capital formation in the short-run.

Further explanatory analysis finds little evidence of convergence of regional incomes or profit rates. A negative relationship between capital growth rates and wage rates (holding productivity constant) is also observed although this relationship is not consistently witnessed in all regions or industries. High capital growth rates appear to bias the distribution of earnings in favor of profits and against wages, as do high rates of capital-intensification. Furthermore, changes in regional capital-intensity are positively related to changes in past regional wage rates and labor productivity, and negatively related to past profit rates. Overall, the findings suggest that the distribution of income between labor and capital at the regional level is closely related to capital growth rates and degree of mechanization in production.