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Economic Review

Economic Review
May/June 1995, Volume 80, Number 3

Structural Booms: Why the South Grows
Thomas J. Cunningham

Since the end of the 1991 recession, almost 27 percent of all new jobs in the United States have been created in the six southeastern states that make up the Sixth Federal Reserve District. What accounts for this strong relative economic performance in the region?

This article examines the forces behind the South's economic strength and looks ahead at the course of its economic development in terms of three alternative approaches--the industrial base, the convergence, and the structuralist models. In evaluating the models' usefulness for thinking about why regions grow, the author finds the structuralist approach, which provides a general equilibrium model for understanding capital flows, interest rates, assets, goods, and labor market behavior, to hold the most promise as a perspective on long-term trends because it addresses the root causes of differential growth rates. This approach suggests a number of reasons for the Southeast's relatively rapid recent growth, which, taken together, give evidence of economic and social structures that may attract both employers and employees to the region at a disproportionate rate for some time to come.

FYI--Commercial Bank Profits in 1994
Lynn W. Woosley and James D. Baer

Commercial banks enjoyed another year of high profits in 1994, reporting record net income. However, rapid asset and capital growth slightly reduced rates of return on assets and equity. Banks in the Southeast again outperformed those in the nation as a whole. This article examines the forces behind this performance, concluding that healthy economic conditions augmented banks' bottom lines by stimulating loan growth and curtailing loan losses. Much of the decline in rates of return can be attributed to changes in accounting rules, which resulted in a one-time addition to assets. Extensive tables provide data from 1990 through 1994.

Review Essay--Privatopia and the Public Good
William Roberds

In Privatopia, Evan McKenzie documents the history and legal structure of common interest developments, a form of residential community organization. McKenzie also looks at possible explanations for the rising popularity of these organizations despite the fact that their governing associations may impose more onerous restrictions on residents' behavior than municipal governments do. In this essay, the reviewer discusses McKenzie's explanations and adds his own based on an appreciation of the underlying economic forces that have shaped these types of communities. The reviewer concludes that the challenge for common interest developments is to devise forms of organization that incorporate efficiency advantages while ensuring greater democracy and fair play for residents.

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