One of the main characteristics of regional (subnational) economies is their degree of openness (... more One of the main characteristics of regional (subnational) economies is their degree of openness (Richardson, 1973, pp. 9-10). They rely more heavily on external trade than do national economies. In a sense this openness and dependence on trade is the result of less diversity in natural resource endowments at the regional level; thus interregional differentials in relative resource endowments make the potential gains from interregional trade large. Regional specialization in production and dependence on trade to achieve a consumption pattern different from the pattern of production is thus a result of the relative homogeneity of endowments within a region, the relative homogeneity of the consumption patterns between regions, and the variability in relative factor endowments between regions.
We found in the two previous chapters that both demand- and supply-based models are supported by ... more We found in the two previous chapters that both demand- and supply-based models are supported by the empirical evidence. Each of the two types of models is capable of explaining a significant portion of the observed interregional variations in the growth rates of output. Furthermore, each of the two types of models is capable of generating regional growth patterns closely resembling those observed.
Abstract Cross section data are used to test two types of regional growth models: the demand and ... more Abstract Cross section data are used to test two types of regional growth models: the demand and the supply based models. While the demand based model explained twice as much of the interregional variations in growth rates as did the supply model, we found that the basic element of the supply model, factor mobility, contributes significantly to the determination of regional growth. A model combining both demand and supply is developed and fitted tothe data. The performance of this model as judged by goodness of fit and dynamic simulations is remarkable. Long-run implications are derived from dynamic simulations.
In the discussion of demand-based models of regional growth, we pointed out that their basic prem... more In the discussion of demand-based models of regional growth, we pointed out that their basic premise is that the smallness of a region in a multiregional unit and the lack of barriers to factor mobility render the supply of capital and labor facing the region infinitely elastic. Thus, with no constraints on the supply of inputs or their rates of growth, the explanation of the region’s growth must be found in the forces influencing the demand for its output.
Empirical studies of the role played by production-smoothing in determining inventory behavior ha... more Empirical studies of the role played by production-smoothing in determining inventory behavior have accounted for the production-smoothing effect by the introduction of seasonal dummy variables, and/or the change in output as additional variables in the inventory equation. Lovell [7, 192-93] has reviewed the empirical results of the studies by Johnston, Modigliani and Sauerlender, and Mills, and also reported the results of his own investigation of the production-smoothing effect. The results of these studies lend very weak support to the empirical usefulness of the hypothesis. On the other hand, Ghali [4, 149-57] has produced some evidence strongly supporting the role of production smoothing. In this paper a simple model of inventory behavior is developed under the assumption that the cost functions facing the firm are quadratic. The model includes both the production-smoothing and the buffer-stock motives for holding stocks of finished goods. The model is applied to monthly data for six industries and to ten pooled time seriescross section samples on one of the industries. The results lend strong support to the effect of production-smoothing on inventory behavior. In the concluding section it is shown that the flexible accelerator model of inventory behavior is a special case of the production-smoothing model developed. Modigliani [10] * A summary of the results reported in this paper was presented at the First International Symposium on Inventories, Hungarian Academy of Science, Budapest, August, 1980. I am indebted to a referee of this Journal, and to my colleagues Edwin Fujii and Burnham Campbell for valuable comments and suggestions.
One of the leading hypotheses concerning the dynamics of production over time is the production s... more One of the leading hypotheses concerning the dynamics of production over time is the production smoothing hypothesis. Given a planning horizon which spans a number of production periods, the firm need not produce in each period an amount equal to expected sales. Rather, resorting to inventory accumulation and liquidation, the firm may follow a production plan temporally smoother than the path of demand. If firms faced with convex cost functions chose to smooth the rate of output in order to minimize costs, one would expect to observe that the rate of output would vary less than the rate of sales, with variations in inventory stocks absorbing some of the fluctuations in sales. Recently, work on the testing of the production smoothing hypothesis has cast doubt on its empirical validity. The evidence presented by Alan Blinder seems to indicate that the variance of production exceeds that of sales in seven out of eight two-digit retail industries (1981) and in eighteen out of twenty two-digit manufacturing industries (1983 and 1986). The purpose of this paper, then, is to examine the validity of such tests when seasonally adjusted aggregated data are used. The evidence presented show that the relative size of the variances of the seasonally adjusted production and sales does not provide valid tests of the production smoothing hypothesis. In addition, aggregating over firms where the seasonal patterns differ may also distort tests of production smoothing. Blinder realized that the use of seasonally adjusted data may not provide an adequate test of the hypothesis, stating "Had they been available, I would have preferred to use data that were not seasonally adjusted since the production smoothing model presumably applies to seasonal fluctuations in sales. However, such data are not available" (1983, fn. 19). In this paper I focus on the cement industry because the unadjusted disaggregated data are available for the direct testing of the conjecture that aggregate seasonally adjusted data mask production smoothing phenomenon. Aggregate monthly data on five other industries will also be examined.
International Journal of Production Economics, Jul 1, 2007
ABSTRACT In this paper we compare two hypotheses regarding the cost function that have been used ... more ABSTRACT In this paper we compare two hypotheses regarding the cost function that have been used in past studies of production smoothing. The two hypotheses tested are not nested. The comparison is done using two types of tests designed for non-nested hypotheses: the J-test of Davidson and McKinnon and the Encompassing test. Each of the models was capable of explaining much of the observed monthly output variations in the twenty four industries studied. Yet the J-test leads us to reject both models. The results of the Encompassing test however, indicate that each of the models contributes significantly to the explanation of output variation after accounting for the contribution of the alternative model.
International Journal of Production Economics, 2005
ABSTRACT In this paper I argue that, as might be expected, the initial assumption made about the ... more ABSTRACT In this paper I argue that, as might be expected, the initial assumption made about the cost function will influence the empirical results obtained regarding the convexity. I show that this expectation is supported empirically by estimating the parameters of two quadratic cost functions. The first is that function which has been traditionally used in the literature. The second is a simplified version of the quadratic cost function where the cost of changing the level of output is dropped since the evidence in the literature suggest that this variable has no significant effect on cost. Using physical product monthly data for 24 industries we find that the conclusion reached regarding the convexity of the cost function depends on the assumption we make regarding the cost function. I further find that the simplified function is consistent with the observed behavior of production and sales while the traditional cost function is inconsistent with that behavior.
International Journal of Production Economics, 2003
One of the productions planning models economists have used for the past four decades is the prod... more One of the productions planning models economists have used for the past four decades is the production-smoothing model. The model's conclusion is simple: if cost functions are convex, under certain conditions, firm's production plans may show smaller variability than the firm's sales. This is a result of the first-order condition for cost minimization over the production-planning horizon. In a 1986 paper Blinder raised doubts regarding the ability of the productionsmoothing model to explain the observed data. Some researchers (e.g. Ramey, Journal of Political Economy 99(2) (1991) 306) explained the inconsistency between the theory and the data by providing evidence that the cost functions are non-convex. In this paper, I point out that the shapes of the cost functions depend on the length of the time horizon under consideration. It is possible that while short-run cost functions are upward sloping, long-run cost functions may be downward sloping. Because the planning horizon for firms facing seasonal demand has been shown to be one seasonal cycle, the short-run cost function, whose shape determines the firm's production plan over the horizon, need to be estimated using single planning horizon data, i.e., a single seasonal cycle. Researchers who use long time series data are, in effect estimating long-run cost functions, the slopes of which may be non-positive. I show, further, that convexity of the production cost function is neither necessary nor sufficient condition for production smoothing to be an optimal plan.
Economic Development and Cultural Change, Apr 1, 1976
Extensive literature exists emphasizing the importance of export expansion to the process of grow... more Extensive literature exists emphasizing the importance of export expansion to the process of growth. Little, however, has been done to measure the contribution of export growth to the growth of income. The purpose of this paper is to evaluate the contribution of one of Hawaii's ...
... Thus while a drop in the DW statistic may be taken as an indication that pooling is a specifi... more ... Thus while a drop in the DW statistic may be taken as an indication that pooling is a specification error, so may an increase or no change in the DW statistic.3 Maddala has shown that the poolingmethod used by Tobin is not efficient, and he reports the efficient estimator ...
The purpose of this paper is to provide an estimate of the elasticity and crosselasticities of de... more The purpose of this paper is to provide an estimate of the elasticity and crosselasticities of demand for higher education facing an individual institution. The utility which a high school graduate derives from each educational option open to him is assumed to be a stochastic function of the attributes of that option. For certain types of utility functions the maximization of utility results in the logit probability model. This model is used to analyze the choices made by a sample of high school graduates in Hawaii. Estimates of the price elasticity and the cross-price elasticities of demand for enrollment at the University of Hawaii are obtained. It is found that the demand is quite inelastic with respect to both tuition and total cost of education. These estimates imply that changes in tuition will not affect enrollment appreciably.
In this part of the study we develop a simple model which characterizes the essential features of... more In this part of the study we develop a simple model which characterizes the essential features of Hawaii’s economy and explore the interactions between different economic and demographic variables. The objective is to investigate the alternative growth paths resulting from alternative sets of policies. The projections of export growth developed in chapter 2 provide the inputs for the basic simulation, i.e., the growth path in the absence of a growth policy.
Engineering Costs and Production Economics, May 1, 1989
If firms, faced with convex cost functions choose to smooth the rate of production in order that ... more If firms, faced with convex cost functions choose to smooth the rate of production in order that costs are minimized, one would expect that the rate of production will vary less than sales, with the variations in inventories absorbing much of the sales fluctuations. The evidence presented by Blinder, however, seems to indicate that the variance of production exceeds that of sales in retail industries (1981) and in manufacturing industries (1983). The purpose of this paper is to examine the value of such evidence when the data used are seasonally adjusted aggregated data. II A SIMPLE MODEL Consider a simple model of production planning used in Ghali (198 1, 1982) where the firm's planning horizon' is divided into "n" production periods. The production cost function is quadratic in level of production and the inventory holding cost function is quadratic in the change in inventory stock. The cost function over the planning horizon in its simplest form can be written as: C = i~t [bP: + h(Pi-Sf)'], (1) I The start of the planning horizon is taken as: ".. . the period after the peak demand period when the demand rate first falls below the average for the cycle, the period where inventories characteristically reach minimum," Magee (1967, 166-167). See also Klein (1961), M~i~ani and Hohn (1955) and M~igliani and Sauertender (1955). For Portland Cement the planning horizon was assumed to begin at the start of November.
Abstract When the dependent variable is a ratio, and its numerator also appears as the denominato... more Abstract When the dependent variable is a ratio, and its numerator also appears as the denominator of an explanatory variable, doubts exist with respect to the bias of the estimated effect. Although the problem arises in many contexts, it is posed here in the context of estimating the deterrence effect of punishment on crime. This is the context in which Logan (1978) suggests the method of “part-correlation.” By expressing this method in a regression framework, the results of the analysis of specification error are drawn upon to simplify Logan's procedure, proper measures are derived, and results are generalized. Finally, the effects of measurement errors are introduced and the bias examined.
Abstract Savin and White (1978) suggested a simultaneous test for two types of specification erro... more Abstract Savin and White (1978) suggested a simultaneous test for two types of specification error. This paper generalizes their test to cover all four common sources of specification errors: functional form, autocorrelated disturbances, heteroskedasticity, and missing variables. The Savin-White test, as well as standard tests for one specific error, are special cases of the test developed. The generalized test is applied to data in an example.
Theories of regional growth can be conveniently grouped into two categories. In the first group t... more Theories of regional growth can be conveniently grouped into two categories. In the first group the growth of demand for a region’s output, particularly the growth of exports, is regarded as the essential determinant of regional growth. This role is assumed by the growth of inputs required for the production of goods and services in the second group of theories. While we shall discuss both groups of theories in section 1.2 it is important to point out at the outset that natural resources and the limitations of these resources should play an important role in both groups of theories, even though this role is not typically discussed in the literature. The neglect of natural resources and the limitations they impose on regional growth and on the growth alternatives available to a region common to all models advanced in the literature arises from the underlying assumption that natural resources are inexhaustible. If natural resources required for the production of a particular output are available in unlimited quantities, or if the nature of the production process is such that the limited supply of these resources is not destroyed in the process so that they may be reused perpetually, both groups of models would be justified in their neglect of the limitation to regional growth imposed by such resources.
There exist a variety of models pertaining to the explanation of the regional growth process. Som... more There exist a variety of models pertaining to the explanation of the regional growth process. Some empirical evidence exists in support of some of these models. It is not possible, however, to evaluate the relative merits of the models on the basis of the evidence, for the data base used for each differ from that used for the others. Yet, in view of the large number of models available, and the tendency to develop new ones, it is crucial that such an empirical evaluation be made. In this paper we consider the three most widely accepted demand models of regional growth, and examine the ability of each to explain the variation of growth experience among the different regions of the U.S. We also examine the degree to which the empirical evidence support or contradict the implicit assumptions and implications of each. Because a common data base is used for the estimation of all three models (cross-section samples on the 48 contiguous states and the District of Columbia, 1947, 1958 and 1963), we are able to assess the relative merits of the models and their dynamic behavior.
One of the main characteristics of regional (subnational) economies is their degree of openness (... more One of the main characteristics of regional (subnational) economies is their degree of openness (Richardson, 1973, pp. 9-10). They rely more heavily on external trade than do national economies. In a sense this openness and dependence on trade is the result of less diversity in natural resource endowments at the regional level; thus interregional differentials in relative resource endowments make the potential gains from interregional trade large. Regional specialization in production and dependence on trade to achieve a consumption pattern different from the pattern of production is thus a result of the relative homogeneity of endowments within a region, the relative homogeneity of the consumption patterns between regions, and the variability in relative factor endowments between regions.
We found in the two previous chapters that both demand- and supply-based models are supported by ... more We found in the two previous chapters that both demand- and supply-based models are supported by the empirical evidence. Each of the two types of models is capable of explaining a significant portion of the observed interregional variations in the growth rates of output. Furthermore, each of the two types of models is capable of generating regional growth patterns closely resembling those observed.
Abstract Cross section data are used to test two types of regional growth models: the demand and ... more Abstract Cross section data are used to test two types of regional growth models: the demand and the supply based models. While the demand based model explained twice as much of the interregional variations in growth rates as did the supply model, we found that the basic element of the supply model, factor mobility, contributes significantly to the determination of regional growth. A model combining both demand and supply is developed and fitted tothe data. The performance of this model as judged by goodness of fit and dynamic simulations is remarkable. Long-run implications are derived from dynamic simulations.
In the discussion of demand-based models of regional growth, we pointed out that their basic prem... more In the discussion of demand-based models of regional growth, we pointed out that their basic premise is that the smallness of a region in a multiregional unit and the lack of barriers to factor mobility render the supply of capital and labor facing the region infinitely elastic. Thus, with no constraints on the supply of inputs or their rates of growth, the explanation of the region’s growth must be found in the forces influencing the demand for its output.
Empirical studies of the role played by production-smoothing in determining inventory behavior ha... more Empirical studies of the role played by production-smoothing in determining inventory behavior have accounted for the production-smoothing effect by the introduction of seasonal dummy variables, and/or the change in output as additional variables in the inventory equation. Lovell [7, 192-93] has reviewed the empirical results of the studies by Johnston, Modigliani and Sauerlender, and Mills, and also reported the results of his own investigation of the production-smoothing effect. The results of these studies lend very weak support to the empirical usefulness of the hypothesis. On the other hand, Ghali [4, 149-57] has produced some evidence strongly supporting the role of production smoothing. In this paper a simple model of inventory behavior is developed under the assumption that the cost functions facing the firm are quadratic. The model includes both the production-smoothing and the buffer-stock motives for holding stocks of finished goods. The model is applied to monthly data for six industries and to ten pooled time seriescross section samples on one of the industries. The results lend strong support to the effect of production-smoothing on inventory behavior. In the concluding section it is shown that the flexible accelerator model of inventory behavior is a special case of the production-smoothing model developed. Modigliani [10] * A summary of the results reported in this paper was presented at the First International Symposium on Inventories, Hungarian Academy of Science, Budapest, August, 1980. I am indebted to a referee of this Journal, and to my colleagues Edwin Fujii and Burnham Campbell for valuable comments and suggestions.
One of the leading hypotheses concerning the dynamics of production over time is the production s... more One of the leading hypotheses concerning the dynamics of production over time is the production smoothing hypothesis. Given a planning horizon which spans a number of production periods, the firm need not produce in each period an amount equal to expected sales. Rather, resorting to inventory accumulation and liquidation, the firm may follow a production plan temporally smoother than the path of demand. If firms faced with convex cost functions chose to smooth the rate of output in order to minimize costs, one would expect to observe that the rate of output would vary less than the rate of sales, with variations in inventory stocks absorbing some of the fluctuations in sales. Recently, work on the testing of the production smoothing hypothesis has cast doubt on its empirical validity. The evidence presented by Alan Blinder seems to indicate that the variance of production exceeds that of sales in seven out of eight two-digit retail industries (1981) and in eighteen out of twenty two-digit manufacturing industries (1983 and 1986). The purpose of this paper, then, is to examine the validity of such tests when seasonally adjusted aggregated data are used. The evidence presented show that the relative size of the variances of the seasonally adjusted production and sales does not provide valid tests of the production smoothing hypothesis. In addition, aggregating over firms where the seasonal patterns differ may also distort tests of production smoothing. Blinder realized that the use of seasonally adjusted data may not provide an adequate test of the hypothesis, stating "Had they been available, I would have preferred to use data that were not seasonally adjusted since the production smoothing model presumably applies to seasonal fluctuations in sales. However, such data are not available" (1983, fn. 19). In this paper I focus on the cement industry because the unadjusted disaggregated data are available for the direct testing of the conjecture that aggregate seasonally adjusted data mask production smoothing phenomenon. Aggregate monthly data on five other industries will also be examined.
International Journal of Production Economics, Jul 1, 2007
ABSTRACT In this paper we compare two hypotheses regarding the cost function that have been used ... more ABSTRACT In this paper we compare two hypotheses regarding the cost function that have been used in past studies of production smoothing. The two hypotheses tested are not nested. The comparison is done using two types of tests designed for non-nested hypotheses: the J-test of Davidson and McKinnon and the Encompassing test. Each of the models was capable of explaining much of the observed monthly output variations in the twenty four industries studied. Yet the J-test leads us to reject both models. The results of the Encompassing test however, indicate that each of the models contributes significantly to the explanation of output variation after accounting for the contribution of the alternative model.
International Journal of Production Economics, 2005
ABSTRACT In this paper I argue that, as might be expected, the initial assumption made about the ... more ABSTRACT In this paper I argue that, as might be expected, the initial assumption made about the cost function will influence the empirical results obtained regarding the convexity. I show that this expectation is supported empirically by estimating the parameters of two quadratic cost functions. The first is that function which has been traditionally used in the literature. The second is a simplified version of the quadratic cost function where the cost of changing the level of output is dropped since the evidence in the literature suggest that this variable has no significant effect on cost. Using physical product monthly data for 24 industries we find that the conclusion reached regarding the convexity of the cost function depends on the assumption we make regarding the cost function. I further find that the simplified function is consistent with the observed behavior of production and sales while the traditional cost function is inconsistent with that behavior.
International Journal of Production Economics, 2003
One of the productions planning models economists have used for the past four decades is the prod... more One of the productions planning models economists have used for the past four decades is the production-smoothing model. The model's conclusion is simple: if cost functions are convex, under certain conditions, firm's production plans may show smaller variability than the firm's sales. This is a result of the first-order condition for cost minimization over the production-planning horizon. In a 1986 paper Blinder raised doubts regarding the ability of the productionsmoothing model to explain the observed data. Some researchers (e.g. Ramey, Journal of Political Economy 99(2) (1991) 306) explained the inconsistency between the theory and the data by providing evidence that the cost functions are non-convex. In this paper, I point out that the shapes of the cost functions depend on the length of the time horizon under consideration. It is possible that while short-run cost functions are upward sloping, long-run cost functions may be downward sloping. Because the planning horizon for firms facing seasonal demand has been shown to be one seasonal cycle, the short-run cost function, whose shape determines the firm's production plan over the horizon, need to be estimated using single planning horizon data, i.e., a single seasonal cycle. Researchers who use long time series data are, in effect estimating long-run cost functions, the slopes of which may be non-positive. I show, further, that convexity of the production cost function is neither necessary nor sufficient condition for production smoothing to be an optimal plan.
Economic Development and Cultural Change, Apr 1, 1976
Extensive literature exists emphasizing the importance of export expansion to the process of grow... more Extensive literature exists emphasizing the importance of export expansion to the process of growth. Little, however, has been done to measure the contribution of export growth to the growth of income. The purpose of this paper is to evaluate the contribution of one of Hawaii's ...
... Thus while a drop in the DW statistic may be taken as an indication that pooling is a specifi... more ... Thus while a drop in the DW statistic may be taken as an indication that pooling is a specification error, so may an increase or no change in the DW statistic.3 Maddala has shown that the poolingmethod used by Tobin is not efficient, and he reports the efficient estimator ...
The purpose of this paper is to provide an estimate of the elasticity and crosselasticities of de... more The purpose of this paper is to provide an estimate of the elasticity and crosselasticities of demand for higher education facing an individual institution. The utility which a high school graduate derives from each educational option open to him is assumed to be a stochastic function of the attributes of that option. For certain types of utility functions the maximization of utility results in the logit probability model. This model is used to analyze the choices made by a sample of high school graduates in Hawaii. Estimates of the price elasticity and the cross-price elasticities of demand for enrollment at the University of Hawaii are obtained. It is found that the demand is quite inelastic with respect to both tuition and total cost of education. These estimates imply that changes in tuition will not affect enrollment appreciably.
In this part of the study we develop a simple model which characterizes the essential features of... more In this part of the study we develop a simple model which characterizes the essential features of Hawaii’s economy and explore the interactions between different economic and demographic variables. The objective is to investigate the alternative growth paths resulting from alternative sets of policies. The projections of export growth developed in chapter 2 provide the inputs for the basic simulation, i.e., the growth path in the absence of a growth policy.
Engineering Costs and Production Economics, May 1, 1989
If firms, faced with convex cost functions choose to smooth the rate of production in order that ... more If firms, faced with convex cost functions choose to smooth the rate of production in order that costs are minimized, one would expect that the rate of production will vary less than sales, with the variations in inventories absorbing much of the sales fluctuations. The evidence presented by Blinder, however, seems to indicate that the variance of production exceeds that of sales in retail industries (1981) and in manufacturing industries (1983). The purpose of this paper is to examine the value of such evidence when the data used are seasonally adjusted aggregated data. II A SIMPLE MODEL Consider a simple model of production planning used in Ghali (198 1, 1982) where the firm's planning horizon' is divided into "n" production periods. The production cost function is quadratic in level of production and the inventory holding cost function is quadratic in the change in inventory stock. The cost function over the planning horizon in its simplest form can be written as: C = i~t [bP: + h(Pi-Sf)'], (1) I The start of the planning horizon is taken as: ".. . the period after the peak demand period when the demand rate first falls below the average for the cycle, the period where inventories characteristically reach minimum," Magee (1967, 166-167). See also Klein (1961), M~i~ani and Hohn (1955) and M~igliani and Sauertender (1955). For Portland Cement the planning horizon was assumed to begin at the start of November.
Abstract When the dependent variable is a ratio, and its numerator also appears as the denominato... more Abstract When the dependent variable is a ratio, and its numerator also appears as the denominator of an explanatory variable, doubts exist with respect to the bias of the estimated effect. Although the problem arises in many contexts, it is posed here in the context of estimating the deterrence effect of punishment on crime. This is the context in which Logan (1978) suggests the method of “part-correlation.” By expressing this method in a regression framework, the results of the analysis of specification error are drawn upon to simplify Logan's procedure, proper measures are derived, and results are generalized. Finally, the effects of measurement errors are introduced and the bias examined.
Abstract Savin and White (1978) suggested a simultaneous test for two types of specification erro... more Abstract Savin and White (1978) suggested a simultaneous test for two types of specification error. This paper generalizes their test to cover all four common sources of specification errors: functional form, autocorrelated disturbances, heteroskedasticity, and missing variables. The Savin-White test, as well as standard tests for one specific error, are special cases of the test developed. The generalized test is applied to data in an example.
Theories of regional growth can be conveniently grouped into two categories. In the first group t... more Theories of regional growth can be conveniently grouped into two categories. In the first group the growth of demand for a region’s output, particularly the growth of exports, is regarded as the essential determinant of regional growth. This role is assumed by the growth of inputs required for the production of goods and services in the second group of theories. While we shall discuss both groups of theories in section 1.2 it is important to point out at the outset that natural resources and the limitations of these resources should play an important role in both groups of theories, even though this role is not typically discussed in the literature. The neglect of natural resources and the limitations they impose on regional growth and on the growth alternatives available to a region common to all models advanced in the literature arises from the underlying assumption that natural resources are inexhaustible. If natural resources required for the production of a particular output are available in unlimited quantities, or if the nature of the production process is such that the limited supply of these resources is not destroyed in the process so that they may be reused perpetually, both groups of models would be justified in their neglect of the limitation to regional growth imposed by such resources.
There exist a variety of models pertaining to the explanation of the regional growth process. Som... more There exist a variety of models pertaining to the explanation of the regional growth process. Some empirical evidence exists in support of some of these models. It is not possible, however, to evaluate the relative merits of the models on the basis of the evidence, for the data base used for each differ from that used for the others. Yet, in view of the large number of models available, and the tendency to develop new ones, it is crucial that such an empirical evaluation be made. In this paper we consider the three most widely accepted demand models of regional growth, and examine the ability of each to explain the variation of growth experience among the different regions of the U.S. We also examine the degree to which the empirical evidence support or contradict the implicit assumptions and implications of each. Because a common data base is used for the estimation of all three models (cross-section samples on the 48 contiguous states and the District of Columbia, 1947, 1958 and 1963), we are able to assess the relative merits of the models and their dynamic behavior.
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Papers by Moheb Ghali