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Abstract

The recovery from the Great Recession has been slow compared to previous recoveries. However, at the state level the pace of improvement has varied considerably. This study in-vestigates the reasons for the variation in state economic recovery from the Great Recession by identifying determinants of two performance measures: growth in state real gross domestic product (GDP) and growth in state nonfarm payroll employment. The results showed that economic structure of the state matters; in particular, states with relatively larger GDP shares in agriculture, energy, financial services, and durable manufacturing (especially for motor ve-hicles and parts) had faster GDP growth, while concentrations in financial services and dura-ble manufacturing were associated with greater employment growth. States increasing indi-vidual income and corporate income taxes during the recession and recovery had slower GDP and job growth, while states increasing minor taxes and fees had a faster GDP recovery. Last-ly, states receiving more funds from the American Recovery Act experienced faster recoveries in both GDP and jobs.

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