State per Capita Income Differentials: 1940 and 1950

Abstract

Analysts of differences in state per capita incomes are faced, like all analysts who seek to explain dispersion about a measure of central tendency, with the problem of finding causal factors of an acceptable degree of significance under both static and dynamic conditions. In an earlier paper2 in the Southern Economic Journal, four factors were tested in a regression analysis with state per capita incomes for 1940. Since one year was represented, the results were applicable to the static situation only. The four factors were: X2, per cent employed labor force in agriculture, forestry, and fisheries; X3, per cent population employed; X4, per cent population Negro; and X5, median years of schooling completed of males 25 years old or over.3 The thesis was that state per capita income differences are a function of stage of economic development of the geographic unit, and of the extent and effectiveness of participation of the labor force in the economic organization. X2, measuring the relative size of agriculture in the economic organization, reflected inversely the economic evolution of the economy, that is, the higher the percentage of the employed labor force occupied in agriculture the more elementary the form of economic organization, hence the lower the per capita income. The extent of participation of the population in the economic organization was reflected mainly by two factors; namely, X3, the per cent of the population employed, and X4, the per cent of the population Negro. Since per capita income is the weighted quotient resulting from division of total income by the entire population, the significance of per cent population employed (X3) as a measure of participation becomes obvious; for it includes the influence of unemployable children, the aged and the crippled, women unemployed by choice, and unemployed men of the regular working force, as well as, of course, all the employed. X4, percentage of the population Negro, measures in a rough way the effects on economic returns which result from obstacles to employment and discrimination in pay of an important group in the population. The factor shows a lack of full participation of a segment of the population in the economic organization for production which exists in a given geographic unit. The fourth factor, X5, the median years of schooling completed of all males 25