Capital Deepening and Manufacturing's Contribution to Regional Economic Convergence

Using data on the manufacturing sector for the 50 states during 1977-1996, we decompose labor productivity growth into changes due to enhanced efficiency, capital accumulation, and technological progress. We find some evidence that labor productivity is converging among the 50 states, although the variance of labor productivity increased during 1977-1996. Using a series of kernel distribution tests we find that capital accumulation and technological progress contributed to labor productivity growth during the period, but changes in state efficiency had no effect on productivity growth.