Explaining Per Capita Personal Income Differences between States

The purpose of this paper is to identify factors that explain the differences in state PCPI levels and to examine the question of how demographic factors have influenced changes in state PCPI levels over the census years between 1950 and 2000. The results suggest that the racial composition of state populations has had little influence on state real PCPI levels. The important variables in explaining real PCPI differences between the states appear to be the percentage of the population that lives in urban areas, the percentage of the population with a four-year college degree, and the percentage of the population employed in the service sector.