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W. Robert Reed

Department of Economics, University of Canterbury, Private Bag 4800, Christchurch 8140, New Zealand

(1) The subsequent discussion of previous research restricts itself to state-level analyses in which the dependent variable is income or income growth, where income is measured either by Personal Income or Gross State Product in either total or per capita terms.

(2) Tomljanovich (2004) also allows for dynamic tax effects, but his study only includes state taxes, not state and local. The practical implication of this is that it ignores property taxes, among others, and locally financed public expenditures. The empirical importance of these is demonstrated by Helms (1985).

(3) The textbook Solow model is [Y.sub.t] = [[K.sup.[alpha].sub.t] ([L.sub.t] [Q.sub.t]).sup.1-[alpha]] = [Q.sup.1- [alpha].sub.t] [K.sup.[alpha].sub.t] [L.sup.1-[alpha].sub.t]. Mankiw et al.'s augmented version of the Solow model is [Y.sub.t] = [[K.sup.[alpha].sub.t] [H.sup.[beta].sub.t] ([L.sub.t] [Q.sub.t]).sup.1-[alpha]-beta] = [H.sup.[beta].sub.t] [[Q.sup.1-[alpha]-[beta]].sub.t]] [K.sup.[alpha].sub.t] [L.sup.1-[alpha]-[beta].sub.t] where H represents human capital.

(4) An alternative specification solves for the steady state value of y as a function of exogenous parameters, and then introduces convergence through the inclusion of a lagged value of the dependent variable. The main cost of this approach is that it requires the imposition of additional restrictions.

(5) Alaska and Hawaii were omitted, as is usual in studies of U.S. state economic growth.

(6) The Appendix presents statistical descriptions of all the variables used in this study.