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The Atlanta Fed


Atlanta Fed Economist Looks at Forces Behind South's Economic Strength

For release October 24, 1995

ATLANTA FED ECONOMIST LOOKS AT FORCES
BEHIND SOUTH'S ECONOMIC STRENGTH

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?

In an article in the Atlanta Fed's Economic Review, Research Officer Thomas J. Cunningham 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.

The first of these models focuses on the industries that are relatively more important in a region as the key to understanding its future prospects. The second traces development in terms of convergence toward nationwide averages. The third looks at the economy as a whole, including capital flows, interest rates, assets, goods, and labor market behavior.

Cunningham evaluates these models' usefulness for thinking about why regions grow. He finds that the structuralist approach holds the most promise as a perspective on long-term trends because it addresses the root causes of differential growth rates among regions.

The structuralist approach suggests a number of reasons for the Southeast's relatively rapid recent growth. These reasons taken together, Cunningham concludes, 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.

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