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Thursday, October 08, 2009

Long term income changes: Autos and government

Via Gelman's blog I found this statement by Matthew Continetti:

"In their new book, "Rich States, Poor States," Arthur Laffer, Stephen Moore and Jonathan Williams rank all 50 states based on economic performance over the last decade. Seven out of the 10 best performing are right-to-work states. Eight of the 10 worst performing are not." 

I happen to have a longer-term graph handy. Each two-letter abbreviation is a state. The X axis is per capita personal income in 1929, converted to a Z score (subtracting the mean and dividing by the standard deviation).  The Y axis is the same data for 2007.

The main thing one is struck by is how similar the income structures are. Across 70 years, the richer states are generally still richer and the poorer states still poorer.

The exceptions are also interesting. There are five states that used to be above average, and are now below. This is the lower right quadrant. Four are rust belt states with substantial automobile manufacturing dependence (MI, OH, WI, MO). The other is Oregon (OR).

There are two states in the upper left quadrant: Virginia, which has benefitted from the expansion of the federal government in the DC suburbs, and Florida, which as become a big retirement destination.

So, the longer-term exceptions seem more related to the rise and fall of particular industries (and maybe the widespread adoption of air conditioning) than right to work laws.