Productivity and Convergence across U.S. States and Industries

We examine the sources of aggregate labor productivity movements and convergence in the U.S. states from 1963 to 1989. Productivity levels vary widely across sectors and across states, as do sectoral output and employment shares. The main finding is the diverse performance of sectors regarding convergence. Using both cross-section and time series methods, we find convergence in labor productivity for both manufacturing and mining. However, we find that convergence does not hold for all sectors over the period. Decomposing aggregate convergence into industry productivity gains and changing sectoral shares of output, we find the manufacturing sector to be responsible for the bulk of cross-state convergence.