A Study of Regional Economic Policy Focusing on Three Approaches

Abstract

Regional economic growth can have a quite different dynamic and logic than national economic growth. This paper empirically investigates whether three major approaches to regional economic development: industrial mix, human capital, and quality of place significantly contribute to the regional economy. This paper tests the hypotheses using ordinary least squares (OLS) based on state-level data from the United States. The OLS results indicated a significant effect of industrial mix on regional economic growth when other factors were controlled for, though significance levels differed depending on the definition of "high-tech industry". The joint hypothesis test on human capital and quality of place showed they were statistically insignificant. The insignificance of the human-capital variables was different from the expectation. This may be caused by the fact that the level of analysis of this study is a state rather than a city, which may dilute the concentration of human capital in major cities. The significance of the industrial mix variables is meaningful because the positive relation between the concentration of high-tech industries and regional economic growth supports regional governments' efforts in Korea to establish or lure more high-tech industries into their regions. However, because the result is sensitive to various definitions of high-tech industries, it needs cautious interpretation.