State-level Economic Conditions Research Articles

Tracking Weekly State-Level Economic Conditions

AbstractThis paper develops a novel dataset of weekly economic conditions indices for the 50 U.S. states going back to 1987 based on mixed-frequency dynamic factor models with weekly, monthly, and quarterly variables that cover multiple dimensions of state economies. We find considerable cross-state heterogeneity in the length, depth, and timing of business cycles. We illustrate the usefulness of these state-level indices for quantifying the main contributors to the economic collapse caused by the COVID-19 pandemic and for evaluating the effectiveness of the Paycheck Protection Program. We also propose an aggregate indicator that gauges the overall weakness of the U.S. economy.

Do U.S. economic conditions at the state level predict the realized volatility of oil-price returns? A quantile machine-learning approach

Because the U.S. is a major player in the international oil market, it is interesting to study whether aggregate and state-level economic conditions can predict the subsequent realized volatility of oil price returns. To address this research question, we frame our analysis in terms of variants of the popular heterogeneous autoregressive realized volatility (HAR-RV) model. To estimate the models, we use quantile-regression and quantile machine learning (Lasso) estimators. Our estimation results highlights the differential effects of economic conditions on the quantiles of the conditional distribution of realized volatility. Using weekly data for the period April 1987 to December 2021, we document evidence of predictability at a biweekly and monthly horizon.

Credit Union and Bank Subprime Lending in the Great Recession

Abstract Firm structure affects incentives and performance. We document significant differences in subprime lending between banks and credit unions prior to and during the Great Recession. In 2006, 23.6% of mortgages from commercial banks were subprime versus only 3.6% of mortgages from credit unions. Moreover, banks were more likely to fail, and had higher delinquency and net charge-off ratios immediately following the financial crisis. Our empirical models control for important differences between credit unions and banks including firm-level characteristics, borrower-level characteristics, and state-level economic conditions. We argue that the remaining difference captures the effects of credit unions’ nonprofit and cooperative structure, which encourages them to internalize the utility of their customer-owners. Our findings explain why credit unions often appear more risk averse relative to commercial banks, a result with important research and policy implications. (JEL G12, G31)

Tracking Weekly State-Level Economic Conditions

In this paper, we develop a novel dataset of weekly economic conditions indices for the 50 U.S. states going back to 1987 based on mixed-frequency dynamic factor models with weekly, monthly, and quarterly variables that cover multiple dimensions of state economies. We show that there is considerable heterogeneity in the length, depth, and timing of business cycles across individual states. We assess the role of states in national recessions and propose an aggregate indicator that allows us to gauge the overall weakness of the U.S. economy. We also illustrate the usefulness of these state-level indices for quantifying the main forces contributing to the economic collapse caused by the COVID-19 pandemic and for evaluating the effectiveness of federal economic policies like the Paycheck Protection Program.

Tracking Weekly State-level Economic Conditions

In this paper, we develop a novel dataset of weekly economic conditions indices for the 50 U.S. states going back to 1987 based on mixed-frequency dynamic factor models with weekly, monthly, and quarterly variables that cover multiple dimensions of state economies. We show that there is considerable heterogeneity in the length, depth, and timing of business cycles across individual states. We assess the role of states in national recessions and propose an aggregate indicator that allows us to gauge the overall weakness of the U.S. economy. We also illustrate the usefulness of these state-level indices for quantifying the main forces contributing to the economic collapse caused by the COVID-19 pandemic and for evaluating the effectiveness of federal economic policies like the Paycheck Protection Program.

Tracking weekly state-level economic conditions

In this paper, we develop a novel dataset of weekly economic conditions indices for the 50 U.S. states going back to 1987 based on mixed-frequency dynamic factor models with weekly, monthly, and quarterly variables that cover multiple dimensions of state economies. We show that there is considerable heterogeneity in the length, depth, and timing of business cycles across individual states. We assess the role of states in national recessions and propose an aggregate indicator that allows us to gauge the overall weakness of the U.S. economy. We also illustrate the usefulness of these state-level indices for quantifying the main forces contributing to the economic collapse caused by the COVID-19 pandemic and for evaluating the effectiveness of federal economic policies like the Paycheck Protection Program.

Does Intergenerational Mobility Increase Corporate Profits?

We find that firms located in areas with higher intergenerational mobility are more profitable. Building off the work of Chetty and Hendren (2018a and 2018b)—who provide measures of intergenerational mobility for all commuting zones (essentially, metropolitan areas) within the U.S.—we are the first to show the positive association between intergenerational mobility and corporate profitability. Our regressions compare firms in the same industry at the same point in time and fully control for time-varying state-level shocks. As such, our findings cannot be explained by either differences in industry composition across localities or by variation in state-level economic conditions; nor can our results be explained by differences in firm characteristics or by local economic conditions. Rather, we argue that our findings are best explained by intergenerational mobility influencing human capital formation. Areas with higher mobility do a better job in unlocking their residents’ innate talents, which in turn is associated with improved performance by locally headquartered firms. In essence, our results uncover a positive link between greater equality of opportunity and increased corporate profitability.

Varying weekly work hours and earnings instability in the Great Recession

Unstable work schedules are increasingly a prominent stratification outcome, particularly for low-wage workers. Nationally representative and longitudinal research on the topic is limited, however. This article examines varying numbers of weekly work hours among hourly workers, their increase during the Great Recession of the late 2000s, and their impact on growing earnings instability. Using data from the Survey of Income and Program Participation (SIPP), the cumulative probability of ever reporting varying hours among hourly workers increased from 36 percent between 2004 and 2007 to 46 percent between 2008 and 2012. Changes in state-level economic conditions, particularly state-level unemployment rates and economic growth, largely explain the increase in varying hours, consistent with arguments that employers pass the costs of volatile demand onto workers. Finally, variance function regressions show the growth of varying hours accounts for the significant increase in earnings instability from 2004–7 to 2008–12.

Economic Conditions and Drug and Opioid Overdose Deaths.

We examine the effects of state-level economic conditions including unemployment rates, median house price, median household income, insurance coverage, and annual and weekly work time on deaths on drug overdose deaths including from opioids and prescription opioids between 1999 and 2014. We employ difference-in-differences estimation controlling for state and year fixed effects, state-specific time trends, and demographic characteristics. Drug overdose deaths significantly declined with higher house prices, an effect driven by reduction in prescription-opioid mortality, by nearly 0.17 deaths per 100,000 (~4%) with a $10,000 increase in median house price. House price effects were more pronounced and only significant among males, non-Hispanic Whites, and individuals younger 45 years. Other economic indicators had insignificant effects. Our findings suggest that economic downturns that substantially reduce house prices such as the Great Recession can increase opioid-related deaths, suggesting that efforts to control access to such drugs should especially intensify during these periods.

Socioeconomic Variation in the Effect of Economic Conditions on Marriage and Nonmarital Fertility in the United States: Evidence From the Great Recession.

The United States has become increasingly characterized by stark class divides in family structure. Poor women are less likely to marry than their more affluent counterparts but are far more likely to have a birth outside of marriage. Recent theoretical and qualitative work at the intersection of demography and cultural sociology suggests that these patterns are generated because poor women have high, nearly unattainable, economic standards for marriage but make a much weaker connection between economic standing and fertility decisions. We use the events of the Great Recession, leveraging variation in the severity of the crisis between years and across states, to examine how exposure to worse state-level economic conditions is related to poor women's likelihood of marriage and of having a nonmarital birth between 2008 and 2012. In accord with theory, we find that women of low socioeconomic status (SES) exposed to worse economic conditions are indeed somewhat less likely to marry. However, we also find that unmarried low-SES women exposed to worse economic conditions significantly reduce their fertility; economic standing is not disconnected from nonmarital fertility. Our results suggest that economic concerns were connected to fertility decisions for low-SES unmarried women during the Great Recession.

Local Business Cycles and Local Liquidity

AbstractThis study examines whether state-level economic conditions affect the liquidity of local firms. We find that liquidity levels of local stocks are higher (lower) when the local economy has performed well (poorly). This relation is stronger when local financing constraints are more binding, the local information environment is more opaque, and local institutional ownership levels and trading intensity are higher. Overall the evidence supports the notion that the geographical segmentation of U.S. capital markets generates predictable patterns in local liquidity.

Banking-industry specific and regional economic determinants of non-performing loans: Evidence from US states

The present study examines state-level banking-industry specific as well as region economic determinants of non-performing loans for all commercial banks and savings institutions across 50 US states and the District of Columbia for 1984–2013. Using both fixed effects and dynamic-GMM estimations, I find greater capitalization, liquidity risks, poor credit quality, greater cost inefficiency and banking industry size to significantly increase NPLs, while greater bank profitability lowers NPLs. Moreover, higher state real GDP and real personal income growth rates, and changes in state housing price index reduce NPLs, while inflation, state unemployment rates, and US public debt significantly increase NPLs. The findings imply that regular stress tests on banks’ loan quality that typically underpin scenarios for a rise in NPLs, should take into account the impact of ‘micro’ or state-level economic conditions on NPLs, in addition to banks’ capital and credit quality, and effective cost management in assessing banks financial health.

Local Business Cycles and Local Liquidity

This study examines whether state-level economic conditions affect the liquidity of local firms. We find that liquidity levels of local stocks are higher (lower) when the local economy has performed well (poorly). This relation is stronger when local financing constraints are more binding, the local information environment is more opaque, and local institutional ownership levels and trading intensity are higher. Overall the evidence supports the notion that the geographical segmentation of U.S. capital markets generates predictable patterns in local liquidity.

Economic Geography and Economic Voting: Evidence from the US States

If voters use information about the economy to assess the competence of incumbents, a connection between economic conditions and incumbent success should only be discernible in settings where public policy might plausibly affect the economy, and where the assignment of government responsibility is relatively straightforward. Applying this logic to gubernatorial elections in the United States, we test the following hypothesis: the connection between economic conditions and incumbents' vote shares is mediated by the structure of the state economy. This hypothesis is premised on the idea that voters understand that raw macroeconomic aggregates – when driven by factors like weather, commodity prices and federal policy – are poor signals of incumbent performance. Using data from gubernatorial elections held between 1950 and 1998, we show that the connection between macroeconomic indicators and incumbent success is weak in states dominated by natural resources and farming but quite strong elsewhere. This finding helps explain why earlier studies found no connection between state-level economic conditions and gubernatorial elections.

The influence of state-level economic conditions on the 1992 U.S. presidential election

Evidence is found that state-level economic conditions played a significant role in the defeat of George Bush in the 1992 U.S. presidential election. Evidence is also found which indicates that the entrance of Ross Perot into the race as an independent candidate was not instrumental in the Bush loss.

A Statistical Analysis of the Effect of State-Level Economic Conditions On the 1992 Presidential Election

Cross-sectional data are used to assess the effect of state-level economic conditions on state outcomes in the 1992 presidential election. The analysis provides evidence on the role of macroeconomic variables in models of national election outcomes and presents simulations to determine whether changes in economic circumstances might have reversed the election's result. It is argued that self-interested voters are more likely to prefer a new president if they are experiencing unemployment or income losses, or if they fear that economic conditions may lead to their own unemployment or inadequate income growth. Altruistic voters may seek a change to improve the economic positions of others. Whether specified as the current unemployment rate or as recent real per capita income growth, states with subpar economic performances are found to have significantly higher voter shares for Clinton. The simulations indicate that reasonable adjustments in state unemploy ment rates do not reverse the election outcome, whereas more rapid personal income growth during the year prior to the election results in a Bush victory.

The influence of state-level economic conditions on presidential elections

Evidence from recent presidential elections indicates that voters behave as if they hold presidents accountable for changes in state-level economic conditions. Given the apparent political payoffs, it is almost a certainty that macroeconomic pump-priming (which affects state-level conditions on average) and certain inter-state redistributive policies would engender support from pragmatic incumbent presidents. The finding that state-level economic conditions can affect voting behavior is particularly relevant to the president already caught in an over-heated macroeconomic environment; for example, because of the peculiarities of the electoral college, Carter might improve his chances for re-election in 1980 by cutting some federal programs in Arizona and Nebraska (strong Ford states) and switching them to Illinois or Texas (closely contested states in 1976). Abolishing the electoral college and permitting popular votes to determine presidential-election outcomes would greatly reduce, if not eliminate, the president's political gains from such state-level redistributive policies. This study's findings also suggest a potentially perverse side-effect from the Federal Election Campaign Act (FECA) as amended in 1974. By legislatively equalizing the major-parties' presidential campaign spending, FECA has removed the natural fund-raising advantage of the incumbent president — especially Republican incumbent presidents. Removing this advantage could well increase the relative importance of other vote-getting activities — for example, the manipulation of national and state-level economic conditions. The findings for the 1972 election suggest that state-level campaign spending influences state-level voting outcomes. Since FECA has lowered major-party presidential campaign spending — which presumably has had the effect of raising the marginal productivity of campaign spending — the allocation of spending across states may be more important than ever in deciding presidential-election outcomes. Finally, the finding that state-level economic conditions affect voting outcomes raises the possibility that earlier studies which have found voter responses to national-level conditions may actually only be measuring the influence of state-level conditions (on average). Determining to what extent voters respond to national-level economic conditions after controlling for state-level conditions must await further analysis.

The Effects of Economic Policies on Votes for the Presidency: Some Evidence from Recent Elections

THREE strands of thought and conjecture contribute to the belief that economic conditions play an important, and perhaps decisive role in elections. Recent theories of rational voting behavior-Buchanan and Tullock' or Riker and Ordeshook2 are examples-treat votes and voting as the outcome of a rational calculation of marginal costs and benefits. Prosperity, rising real income and increased employment may, in this framework, yield benefits to the individual that can be translated into votes for the party or candidate. Related, yet distinct, is the growing body of conjectures about a "political business cycle." High employment and low inflation in election years are followed by anti-inflation policies that temporarily lower employment and the rate of inflation in succeeding years. These policies work gradually and are replaced by policies to stimulate the economy, so the candidate or party can boast of prosperity and lower inflation at the next election. The conjecture arises also from casual and impressionistic evidence and from some studies of voting. Perhaps the most widely cited recent example is the Kennedy-Nixon election of 1960 when a small plurality and rising unemployment seemed to support the conjecture. Econometric studies of voting behavior provide, at most, mixed support. Most of the evidence comes from time series studies of Congressional elections. Kramer, Stigler, and Arcelus and Meltzer used different methods and reached different conclusions.3