4.2.2Output

Variable Y its expresses output originating from industry i, in state s, during the year t. It is defined as the total real 1992 dollar value of the final goods and services produced in industry i within state s. It is similar to value added, which is gross output less intermediate inputs. Gross output measures the sales or receipts and other operating income, commodity taxes, and inventory change. Intermediate inputs define the consumption of goods and services purchased from other US industries or imported. Thus, Y its is the state/industry counterpart of the nation’s Gross Domestic Product (GDP) or a state’s Gross State Product (GSP). At the state level, Y st is the sum of outputs originating in all industries in state s during year t. Similarly, for industry i at the national level, output Y it is the sum of all outputs from that specific industry i originating from all states. Finally, Y t is national output for year t and is measured as the sum of all outputs originating from all industries and all states. The following equation summarizes these relationships between outputs at various levels:

Yt = Σi Yit = Σs Yst = ΣiΣs Yits(4.18)

Note that Y t is not exactly equal to the nation’s GDP, because it does not include output from government and the foreign sector. Indeed, previous studies have also considered “private nonfarm” data.

The source of data for Y it is the Bureau of Economic Analysis (1999b). Values in real 1992 dollars are available from 1982 to 1997, and are available in current dollars for the years 1977 to 1981. I computed the real 1992 values for the years 1977 to 1981. In order to do so, I obtained values for the quantity index for these years and industries, and multiplied them by the current dollar value, based on the following relationship:

Real 1992 dollar value = Current value * Quantity index (base 1992) /100(4.19)

Thus, data for Y are available by state and 2-digit industry for the period 1977-1997, in real 1992 dollars.