The Effects of State Policies on the Location of Industry : Evidence from State Borders

This paper provides new evidence that state policies play a role in the location of industry. The paper classifies a state as pro-business or anti-business depending upon whether or not the state has a right-to-work law. The paper finds there is a discontinuous drop in manufacturing activity when crossing a state border from a pro-business state into an anti-business state. The results suggest that the policies pursued by the pro-business southern states played a role in the migration of industry from the anti-business manufacturing-belt states to the South. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System