Isolating the Economies of States

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Abstract
Despite impressive efforts, we lack an empirically supported explanation of the role of state-level political processes in shaping state economic performance. This study indicates why a concrete understanding of the interplay of state-level political and economic forces has been elusive. State economies are sensitive to external influences. This sensitivity varies systematically and significantly over time and between states. The magnitude of these external influences shows that before we may unravel how states influence their economies, consideration must be given to the extrastate influences that condition the economic environment of states. Pooled models of state economies are estimated for three periods: 1968-1973, 1974-1979, and 1980-1985. In general, state economies were heavily influenced by national economic trends, but over time they have become more economically independent. States are also evaluated individually. Fast growing states in the 1968-1985 period tended to be the most sensitive to national economic conditions while slower growing states were more autonomous.