Exports' Contribution to Economic Growth: Empirical Evidence for California,Massachusetts, and Texas,Using Employment Data

The paper shows an interregional trade model from which testable parameter restrictions for economic base theory, shown to be equivalent to the hypotheses of the Granger causality test, are derived. The results of the tests for three states, based on various bifurcation methods, suggest that economic base theory holds strongly for the crudest definition of the base, but not for others. The frequency analysis indicates a likely association between inherent cyclicalities in employment growth data and economic base theory. The regional multipliers and the timing of economic adjustments to exogenous shocks are also discussed.     

OLS ESTIMATION AND THE t TEST REVISITED IN RANK‐SIZE RULE REGRESSION*

ABSTRACT The rank‐size rule and Zipf's law for city sizes have been traditionally examined by means of OLS estimation and the t test. This paper studies the accurate and approximate properties of the OLS estimator and obtains the distribution of the t statistic under the assumption of Zipf's law (i.e., Pareto distribution). Indeed, we show that the t statistic explodes asymptotically even under the null, indicating that a mechanical application of the t test yields a serious type I error. To overcome this problem, critical regions of the t test are constructed to test the Zipf's law. Using these corrected critical regions, we can conclude that our results are in favor of the Zipf's law for many more countries than in the previous researches such as Rosen and Resnick (1980) or Soo (2005) . By using the same database as that used in Soo (2005) , we demonstrate that the Zipf law is rejected for only one of 24 countries under our test whereas it is rejected for 23 of 24 countries under the usual t test. We also propose a more efficient estimation procedure and provide empirical applications of the theory for some countries.