extended Nelson and Phelps’ idea by introducing the notions of domestic innovation and
catch-up. They maintain that a country or region that lags behind the technology leader in
terms of productivity but at the same time has a higher human capital stock will eventually
catch up and overtake the leader.
It can be noticed from the above review that sectoral analysis of economic growth is
relevant and the notions of space and technological leadership are important as well. These
notions need to be taken into account when modeling the growth process. The present
paper contributes to the literature by focusing on sectoral growth, space and technological
leadership.
3. Exploratory analysis
The data used in the present paper are for the lower 48 states and the District of Columbia.
Data on Gross Domestic Product (GDP) by states across industries are obtained from the
Bureau of Economic Analysis (BEA). The annual GDP by state series consists of estimates
through the period 1963—1997 for Standard Industrial Classification (SIC) industries.1 Like
Barro and Sala-i-Martin (1991) the present study focuses on eight standard non-agricultural
sectors: Mining, Construction, Manufacturing, Transportation and Public Utilities, Wholesale
and Retail Trade, Finance Insurance and Real Estate, Services, and Government. We also
added a sector labeled Total, which represents the eight sectors combined. Individual state
GDP deflators are unavailable, so we use the national GDP deflator to convert the nominal
GDP into 1997 dollars.
The data on employment by sector are from the Bureau of Labor and Statistics
(BLS). Our data represent a significant improvement over those used by Bernard and Jones
1 GDP by state series are also available for 1997—2004 under the North American Industry Classification
(NAICS). Conversion of the two series into a single series would have allowed us to cover a longer time period,
but such a conversion is not feasible because the SIC and NAICS classifications are different in terms of
constituent industries and aggregation.
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