Ten gallon economy sizing up economic growth in texas

Ten-Gallon Economy Ten-Gallon Economy Sizing Up Economic Growth in Texas Edited by Pia M Orrenius, Jesús Cañas, and Michael Weiss TEN-GALLON ECONOMY Copyright © Federal Reserve Bank of Dallas, 2015 Softcover reprint of the hardcover 1st edition 2015 978-137-53016-5 All rights reserved First published in 2015 by PALGRAVE MACMILLAN® in the United States—a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010 Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN 978-1-349-57379-0 ISBN 978-1-137-53017-2 (eBook) DOI 10.1057/9781137530172 Library of Congress Cataloging-in-Publication Data Ten-gallon economy : sizing up economic growth in Texas / edited by Pia M Orrenius, Jesús Cañas, Michael Weiss pages cm Includes bibliographical references and index Economic development—Texas Texas—Economic policy Banks and banking—Texas Texas—Commerce Labor market—Texas I Orrenius, Pia M., editor II Cañas, Jesus, editor III Weiss, Michael, 1954– editor HC107.T4T34 2015 330.9764—dc23 A catalogue record of the book is available from the British Library Design by Newgen Knowledge Works (P) Ltd., Chennai, India First edition: September 2015 10 2015010171 To the people of the Eleventh Federal Reserve District, our hope is that analysis of conditions in our region, as well as reflections on past experiences and future challenges, will inform and enlighten citizens and lawmakers Contents List of Illustrations ix About the Title xiii Preface xv Acknowledgments xvii Part I Introduction Tipping Our Hats to the Ten-Gallon Economy Pia M Orrenius, Jesús Cañas, and Michael Weiss Part II Public Policy and Business Climate Increasing Jobs and Income from Work: The Role and Limitations of Public Policy David Neumark 15 Why Texas Grows Faster: The Role of Smaller Government Jason Saving 33 47 The Shortcomings of the Texas Margin Tax Alan D Viard Part III Human Capital and Labor Markets Texas’ Education Challenge: A Demographic Dividend or Bust? Marta Tienda 61 Oil Boom Lowers Human Capital Investment in Texas Anil Kumar 79 Employment Growth and Labor Market Polarization in the United States and Texas Melissa LoPalo and Pia M Orrenius 91 Part IV Industry and Exports Texas Real Estate: From the 1980s’ Oil Bust to the Shale Oil Boom John V Duca, Michael Weiss, and Elizabeth Organ 109 viii CONTENTS The Evolution of Texas Banking Kory Killgo and Kenneth J Robinson 119 10 The Impact of Changing Energy Prices on the Texas Economy Mine K Yücel, Michael Plante, Amy Jordan, and Nicole Lake 139 11 Texas Comparative Advantage and Manufacturing Exports Jesús Cañas, Luis Bernardo Torres Ruiz, and Christina English 159 Part V Border and Economic Development 12 So Close to Mexico: Economic Spillovers along the Texas–Mexico Border Roberto Coronado, Marycruz De León, and Eduardo Saucedo 183 13 Border Economic Recovery Lags Rest of State Keith R Phillips and Christopher Slijk 199 14 Las Colonias along the Texas–Mexico Border Jordana Barton, Emily Ryder Perlmeter, Elizabeth Sobel Blum, and Raquel R Márquez 213 Contributor Biographies 231 Index 237 Illustrations Figures 2.1 2.2 Effects of State Hiring Credits on Employment Growth, 2007–2011 Range of Estimated Employment Effects of Enterprise Zone Programs 2.3 Averages of Estimated Effects on Growth Rates of Changes from Fortieth to Tenth Position in Rankings of Components of Tax- and Cost-Related Business Climate Indexes, and Comparisons to Nonpolicy Factors 2.4 Contributions of Business Climate Index and Control Variables to Employment Growth (QCEW), 1992–2008 2.5a Relationships Between Economic Growth, Change in Inequality and Rankings on EFI Business Climate Index, 1992–2008: State GDP Growth Versus Change in the 50–10 Gap 2.5b Relationships Between Economic Growth, Change in Inequality and Rankings on EFI Business Climate Index, 1992–2008: State GDP Growth Versus Change in the 90–10 Gap 2.6 Earned Income Tax Credit by Income and Number of Children, 2014 2.7 Estimated Effects of State Earned Income Tax Credit on Probability that Family Earnings are Above Poverty Line or One-Half of Poverty Line 3.1 Texas Consistently Grows Faster than the United States 3.2 Texas Population Growing at Twice National Rate 3.3 Texas Leads Nation in Exports Since 2002 3.4 Texas’ State and Local Per Capita Tax Burden Lower than National Average 3.5 Texas’ State and Local Per Capita Outlays Also Below National Average 3.6 No Clear Relationship between Tax Burden and Per Capita Output Growth 3.7 No Clear Relationship between Government Expenditures and Per Capita Output Growth, Either 4.1 Texas State Margin Tax Revenue 4.2 Disparity in Effective Tax Rates in a Simplified Economy 5.1a US Age–Educational Attainment Pyramid, 1970 5.1b US Age–Educational Attainment Pyramid, 2010 16 18 21 22 23 23 24 25 34 35 36 38 39 40 40 48 52 63 63 CONTRIBUTOR BIOGRAPHIES 233 of Texas at San Antonio Her research has addressed Latina/o issues related to labor, the border, immigration, and community change in San Antonio Márquez received her MA and PhD from the University of Texas at Austin David Neumark is professor of economics and director of the Center for Economics and Public Policy at the University of California, Irvine He is also a research associate at the National Bureau of Economic Research and research fellow at the Institute for the Study of Labor (IZA) Neumark’s research interests include minimum wages and living wages, affirmative action, sex differences in labor markets, the economics of aging, and school-to-work programs He has also done work in demography, health economics, economic development, industrial organization, and finance He has been published in economics journals including the American Economic Review, Quarterly Journal of Economics, Journal of Political Economy, Journal of Labor Economics, and the Journal of Human Resources He is editor of the IZA Journal of Labor Policy and a coeditor of the Journal of Urban Economics Neumark obtained a BA in economics from the University of Pennsylvania and an MA and PhD in economics from Harvard University Elizabeth Organ is a Furman Public Policy Scholar at the New York University School of Law Her research interests involve financial and economic policy reform, with a focus on financial securities and banking regulation Previously, she was a research analyst at the Federal Reserve Bank of Dallas She has a BA in economics from the University of Texas at Dallas Pia M Orrenius is vice president and senior economist in the Research Department of the Federal Reserve Bank of Dallas She is a labor economist working on regional economic growth and demographic change She manages the regional economics group and is executive editor of the quarterly publication Southwest Economy Orrenius is a research fellow at the Tower Center for Political Studies at Southern Methodist University and at the Institute for the Study of Labor (IZA), as well as an adjunct scholar at the American Enterprise Institute Orrenius is also an adjunct professor at Baylor University, where she teaches in the executive MBA program Orrenius was senior economist on the president’s Council of Economic Advisers in Washington, DC, in 2004–2005 She holds bachelor’s degrees in economics and Spanish from the University of Illinois at Urbana–Champaign and a PhD in economics from the University of California, Los Angeles Emily Ryder Perlmeter is an analyst in the Community Development Department at the Federal Reserve Bank of Dallas, where she conducts research on issues related to consumer finance, small business, and the impact of public policies on low- and moderate-income communities She earned a BA from George Washington University and an MPA from New York University Keith R Phillips is assistant vice president and senior economist at the San Antonio Branch of the Federal Reserve Bank of Dallas His research interests include regional economics and economic forecasting Phillips, who joined 234 CONTRIBUTOR BIOGRAPHIES the Dallas Fed in 1984, has developed business-cycle indexes for Texas and its major metropolitan areas He is a contributing member of the Western Blue Chip Economic Forecasting Group He teaches econometrics and forecasting at Trinity, Incarnate Word, and St Mary’s universities and managerial economics in the executive MBA program at the University of Texas at San Antonio Phillips holds BA and MA degrees in economics and a bachelor of journalism degree from the University of Missouri at Columbia He obtained his PhD in economics from Southern Methodist University Michael Plante is a senior research economist in the Research Department at the Federal Reserve Bank of Dallas His research interests include macroeconomics, monetary policy in developed and developing countries, and connections between energy prices and the macroeconomy His recent research has focused on the macroeconomic impacts of fuel subsidies He was previously an assistant professor at Ball State University He received his PhD in economics from Indiana University Kenneth J Robinson is a former assistant vice president in the Financial Industry Studies Department at the Federal Reserve Bank of Dallas, focusing on how financial structure, monetary policy, and economic activity affect US financial markets and banks He has published articles in the Journal of International Money and Finance, Journal of Financial Services Research, and Journal of Macroeconomics Robinson holds a BS from the University of New Orleans, an MS from Louisiana State University, and a PhD from Ohio State University Eduardo Saucedo is a lecturer in the Department of Economics and Finance at the University of Texas–Pan-American His fields of interest include macroeconomics, international trade, economic development, border economics, and the Mexican economy He holds a BA in economics from Universidad Autónoma de Nuevo León, Mexico, an MA in applied economics from the University of Cincinnati, an MA in economics from the University of Houston, and a PhD in economic development from New Mexico State University Jason Saving is a senior research economist and advisor at the Federal Reserve Bank of Dallas, where he conducts research on public policy issues Saving is the author of articles on income inequality, US welfare policy, Social Security, and other policy issues His work has been published in journals such as Economic Inquiry, Southern Economic Journal, Review of Income and Wealth, and National Tax Journal Saving holds a BA in mathematical economics from Rice University and an MA and PhD in economics from the California Institute of Technology Christopher Slijk is a research analyst at the San Antonio Branch of the Federal Reserve Bank of Dallas He joined the Bank in August 2013 and works in the regional group within the Research Department Slijk has a BA in economics from Cornell University Marta Tienda is the Maurice P During ’22 Professor of Demographic Studies and professor of sociology and public affairs at Princeton University, where she directed the Office of Population Research in 1998–2002 Prior to joining CONTRIBUTOR BIOGRAPHIES 235 Princeton in 1997, Tienda held an appointment at the University of Chicago, where she served as chair of the Department of Sociology and editor of the American Journal of Sociology She previously held an appointment at the University of Wisconsin at Madison Tienda is a past president of the Population Association of America and chaired the National Academy of Science panel on Hispanics in 2004–2006 Tienda’s research has focused on the demography of racial and ethnic inequality, social policy, and international migration She recently completed a decadelong study about equity and access to higher education She serves on the White House Commission on Educational Excellence for Hispanics Tienda received a BA from Michigan State University and PhD in sociology from the University of Texas at Austin Luis Bernardo Torres Ruiz is an associate research economist at the Texas A&M University Real Estate Center He was formerly with Banco de México, Mexico’s central bank He holds a PhD from the University of Colorado at Boulder Alan D Viard is a resident scholar at the American Enterprise Institute (AEI), where he studies federal tax and budget policy Prior to joining AEI, Viard was a senior economist at the Federal Reserve Bank of Dallas and an assistant professor of economics at Ohio State University He has also been a visiting scholar at the US Department of the Treasury’s Office of Tax Analysis, a senior economist at the White House’s Council of Economic Advisers, and a staff economist at the Joint Committee on Taxation for Congress While at AEI, Viard has taught public finance at Georgetown University’s Public Policy Institute He is coauthor of Progressive Consumption Taxation: The X Tax Revisited (2012) and The Real Tax Burden: Beyond Dollars and Cents (2011) and editor of Tax Policy Lessons from the 2000s (2009) Viard received a BA in economics from Yale University and PhD in economics from Harvard University Michael Weiss is a senior writer/editor in the Research Department of the Federal Reserve Bank of Dallas He edits and contributes to the Bank’s quarterly review of regional economic trends, Southwest Economy He previously worked as an editor at Bloomberg News and the Dallas Morning News He has an MBA in finance from the University of Texas at Arlington, an MS in journalism from Columbia University, and a BA in Public Affairs from the University of Chicago Mine K Yücel is senior vice president and director of research at the Federal Reserve Bank of Dallas She has been with the Bank since 1989 Prior to becoming research director, Yücel led the Bank’s micro/regional/energy group and was director of publications A renowned energy economist, Yücel is a member of the National Association for Business Economics board of directors and a past president of both the International Association of Energy Economics and United States Association for Energy Economics Before joining the Bank, she was an assistant professor of economics at Louisiana State University She has a BS and MS in mathematics from Bogazici University in Istanbul, Turkey, and a PhD in economics from Rice University in Houston Index Abbott, Greg, 49 age-education profiles Texas and U.S., 71–2, 73 Allegretto, Sylvia A., 27 Alm, R., 62, 74 Alon, S., 62 Altig, Dave, 100, 101 American Enterprise Institute, 5, 233, 235 American Recovery and Reinvestment Act (ARRA), 17, 44 annual return on average assets, Texas banking, 130 Arizmendi, David, 225 Arizona, Texas-Mexico border and, 186 ARRA See American Recovery and Reinvestment Act (ARRA) assets in national and state banks, 122 Atkinson, Anthony B., 92 Autor, David, 91–3, 95, 96, 99 Aw, B., 168 Ayer, Harry W., 184–5 Balassa, B., 162 BA or higher attainment, 68–9 banking See also Texas banking bank failures, 131 overview, 7–9 banking institution failures, oil bust and, 114 Barnett Shale, 8, 142, 143, 144, 152 Barro, Robert J., 41 Barton, Jordana, 10, 227 Bauer, Paul W., 42 Beatty, Ken, 38 Berlin, Gordon L., 26 Bitler, Marianne, 26 Black, D A., 80 Blinder, Alan S., 93 Blum, Elizabeth Sobel, 10, 227 border economic recovery, lagging of, 199–212 business cycles, border, 202–4 Chihuahua, weak employment growth, 203 civilian federal government, spending, 204 El Paso, growth in, 202 employment growth at or above Texas rate, 208 faster growth, border (except El Paso), 200 federal government job growth, 205 federal government spending and, 210 government spending, impact of, 204–7 government transfer payments as share of personal income, 206 Great Recession, border growth after, 208–10 growth and industrial structure, border, 200–2 growth prospects, 210–12 health care and, 201–2 home health care employment, 207, 209 introduction, 199–200 location quotients, employment, 201 Medicaid enrollment, 211 real government GDP growth, 205 Rio Grande Valley, 202, 204 South Texas border metros, 210 trade crossing border, 201 volatility, 203 border economy See also border economic recovery, lagging of; Texas-Mexico border, economic spillovers along overview, 9–10 Border Industrialization Program, 184 Bremner, J., 62, 65, 70 Brown, Stephen P A., 34, 41 Brynjolfsson, Erik, 93 238 INDEX business climate contributions to employment growth, 22 job creation and See state business climate and job creation overview, 4–6 business cycles, border economic recovery and, 202–4 Busso, Matias, 19 Caballero, Enriqueta “Keta,” 226 California exports, ratio of RCA with respect to, 173 exports, Texas comparative advantage and manufacturing of, 175 Texas-Mexico border and, 186 Callan, P M., 61, 64, 65, 72, 73 Cañas, Jesús, 8, 167, 184–5, 194–5, 202, 209 Card, David, 93 Carlisle, Kristin, 227 Cass, Ann, 226 Cassey, A., 160 The Center for Public Policy Priorities, 66, 71 CFDs See contracts for deed (CFDs) change in employment, 95 by quartile, 1979–2006, 100 change in employment share, 1979–2012, 96 Chen, X., 168 Chernick, Howard, 42 Chihuahua, weak employment growth, 203 children, earned income tax credit (EITC) by income and number, 24 Chiquiar, D., 162, 163, 174 Cholesky factor decompositions, energy prices, 157–8 city pairs, list of Texas-Mexico border, economic spillovers along, 186 civilian federal government, spending, 204 coal products, manufacturing, 170 COGS-deduction option, Texas margin tax and, 55–6 Cohn, D., 74 college degree or any college, percent of population with oil boom and human capital investment, 86, 87 college education, differences in share with oil boom and human capital investment, 87, 87–8 Colonias See Las Colonias along the Texas-Mexico Border Colonias, overview, 9–10 Combs, S., 61, 64, 67, 71, 73 comparative advantage, exports See exports, Texas comparative advantage and manufacturing of competition domestic competition, exports, 168 main country competition in world market, exports, 164 computer equipment, exports, 166, 170, 172 “The Contract for Deed Prevalence Project” (University of Texas), 217 contracts for deed (CFDs), 217–18 Cooke, Thornton, 123 Coronado, Roberto A., 9, 201, 204, 209 Corral, Cecilia Guadalupe, 226 Cox, W M., 62, 74 Crain, W Mark, 39 Creusere, M., 66, 72 crude oil production, energy prices, 140 Crum, Lawrence L., 120, 121, 125, 126, 136 Cuellar Mejia, Marisol, 29, 41 Davenport, Corey, 36 Dávila, Alberto E., 185 Davis, Carl, 43 De León, Marycruz, DeNavas-Walt, Carmen, 92 deposit insurance system, Texas banking, 122–7 Deskins, John, 42 DeVore, Chuck, 37 Di, Wenhua, 135 DiNardo, John E., 93 disposition of insured deposits, Texas banking, 127 domestic competition, exports, 168 Dorn, David, 91, 93, 95 “double liability,” Texas banking, 122 Drenkard, Scott, 49–51 Drewery, M P., Jr., 62 drivers of economic growth, 34–7 exports, leading of by Texas, 36 population of Texas, growth of, 35 Dube, Arindrajit, 27 Duca, John V., 7, 117, 135 INDEX Eagle Ford Shale, 8, 99, 142, 143, 146, 151, 153, 211–12 earned income tax credit (EITC), 5, 15, 24–6 by income and number of children, 24 state earned income tax credit (EITC), estimated effect on family income and poverty level, 25 earnings, Las Colonias along the Texas-Mexico Border, 221–3 economic framework, Texas margin tax and, 50–2 Economic Freedom Index (EFI), 22 economic opportunity, Las Colonias along the Texas-Mexico Border, 218 Economic Recovery Tax Act of 1981, 129 economy, Las Colonias along the Texas-Mexico Border, 220–1 Edcouch Elsa Independent School District, 223–4 education, Las Colonias along the Texas-Mexico Border, 221–3 education challenge, 61–77 age-education profiles Texas and U.S., 71–2, 73 BA or higher attainment, 68–9 bachelor’s degree or higher, population with, 70 education landscape, 64–8 educational attainment, 62, 63 ethnic disparities, 66 full-time, first-time freshmen receiving Bachelor’s Degree, 68 Hispanic and Anglo age-education profiles, Texas and U.S., 72, 73 indicators (selected) Texas and United States, 65 introduction, 61–4 lawmakers and, 69–73 racial disparities, 66 education indicators (selected) Texas and United States, 65 educational attainment, 62, 63 BA or higher attainment, 68–9 ethnic disparities, college education, 66 master’s degree or higher, population with, 70 oil boom and human capital See educational attainment, oil boom and human capital investment racial disparities, college education, 66 239 educational attainment, oil boom and human capital investment college degree or any college, percent of population with, 86, 87 college education, differences in share with, 87, 87–8 high school versus college real hourly wage of workers, 85, 86 hourly wages, 84 mean real hourly wage, 84 skill premium, impact on, 85–6 Texas before and after oil boom, 83 United States versus Texas, 82–3 wages, overall impact on, 84–5 worker percent share by educational attainment, 82–3 EFI See Economic Freedom Index (EFI) electronics products, exports, 170, 172 Elliott, Mark, 17 EITC See earned income tax credit (EITC) El Paso, growth in, 202 Emery, J C H., 80 employment, energy prices and, 140, 146, 148, 148–9 employment estimation results, Texas border cities, 191, 191–2 employment estimation results, U.S border cities, 190, 191 employment growth See also job growth effects of state hiring credits on, 16 labor market polarization and See employment growth, labor market polarization and at or above Texas rate, border employment growth, 208 by sector, U.S border cities, 187 employment growth, labor market polarization and, 91–105 change in employment, 1979–2012, 95 change in employment shares by wage quartile, 1979–2006, 100 change in employment shares by wage quartile, 1979–2012, 96 composition of change in employment, 100–1, 102 data, 94–5 full-year, full-time workers, change in employment share, 98, 99 introduction, 91–2 240 INDEX employment growth, labor market polarization and—Continued job growth and polarization, 95–6 job growth by decade, 96–7 job growth in other large states, 97–8 methodology, 94–5 previous research, 92–4 results, 95–8 robustness checks, 98–100 wage growth by industry, 101, 102 wage quartiles in 1980 census, 94 employment increase, oil production and, 154 employment location quotients, border economic recovery, 201 employment regression for Texas border cities with industry-varying coefficients, 193 for U.S and Texas border cities under different specifications, 194 for U.S border cities with industry-varying coefficients, 192 employment trends, real estate after 1980s oil bust, 111 energy, overview, 7–9 energy prices, impact of changing prices on Texas economy, 139–58, 155 Cholesky factor decompositions, 157–8 crude oil production, 140 data, 145–6 employment, impulse response, 148, 148–9 employment data, 146 employment (extended) and energy prices, 140 employment response, oil production increase and, 154 full sample, 1974–2014, impulse response, 149–50 gas price increase, employment response, 149 The geography of Texas oil and gas production, 142–4 impulse responses, 148–55 introduction, 139–41 location of major shale formations by railroad commission district, 142 methodology, 144–5 natural gas, technology and changes in distribution, 144 natural gas model, long-run variance decomposition for Texas employment, 147 natural gas production, 140 oil model, long-run variance decomposition for Texas employment, 147 oil prices, economic activity and, 141 oil production, reversing decades-long trend and, 143 period 1974–1987, 150–1 period 1987–1997, 151–2 period 1997–2005, 152 period 2005–2014, 153 prices, overview of data, 145–6 production, 154 state gross domestic product, 154–5 state gross domestic product, data, 146 VAR model, 144–5, 157–8 variance decomposition for Texas employment, 147–8 energy-related rebound, real estate from 1980s oil bust to the shale oil boom, 116–17 English, Christina, 8, 222 enterprise zones job creation and, 17–19 range of estimated employment effects of programs, 18 Epstein, Arnold M., 210 ethnic disparities, college education readiness, 66 evolution of Texas’ comparative advantage, 165–7 exports leading of by Texas, 36 overview, 7–9 exports, Texas comparative advantage and manufacturing of, 159–79 California, ratio of revealed comparative advantage with respect to, 173 California versus Texas, market gain, 175 coal products manufacturing, 170 competition with Texas, 164 computer equipment, 166, 170, 172 domestic competition, 168 INDEX econometric approach, 172–6 electronics products, 170, 172 evolution of Texas’ comparative advantage, 165–7 fabricated metal products, 167, 171 Illinois, ratio of revealed comparative advantage with respect to, 173 Illinois versus Texas, market gain, 175 introduction, 159–61 main country competition in world market, 164 manufacturing productivity by state, 168–72 methodology for revealed comparative advantage, 162–3 Mexico, 167 motor vehicles, 167 Ohio, ratio of revealed comparative advantage with respect to, 174 Ohio versus Texas, market gain, 176 pattern of comparative advantage, 163–4 petroleum products, 166, 170, 172 rapid growth of, 160 revealed comparative advantage (RCA), 163, 166 shares of world exports, 161 state and country export data, 161–2 total factor productivity (TFP) index, 169 transportation equipment, 171 world manufacturing products, by selected U.S states, 168 fabricated metal products, exports, 167, 171 Fairlie, Robert W., 35 family state earned income tax credit, estimated effect on family income and poverty level, 25 Federal Deposit Insurance Corp (FDIC), 128, 131–2 federal government job growth, border economic recovery, 205 federal government spending, border economic recovery, 210 Federal Reserve, Term Auction Facility, 135 Ferrer, A., 80 finance, real estate, insurance, real estate (FIRE) sectors, Texas-Mexico border, 192 241 Finney, J E., 61, 64–6, 72–3 First Republic Bank, 131–2 Foote, Christopher L., 99 Fragoso, E., 162–3, 174 Freedman, Matthew, 19 Frey, Carl Benedikt, 93 Fullerton, Thomas M., Jr., 185 full-time, first-time freshmen receiving Bachelor’s Degree, 68 full-year, full-time workers, change in employment share, 98, 99 Gallaway, Lowell, 39 Garcia-Mila, Teresa, 41 Garn-St Germain Act, 128, 131–2 gas prices, employment represented by, 149 GDP See gross domestic product (GDP) Gilmer, Robert W., 146, 184–5, 209, 211 Goldin, Claudia, 93 Good, D., 168, 177 Gordon, R J., 64, 73 government expenditures and per capita growth output, 40 government GDP growth, border economic recovery and, 205 government spending, impact on border economic recovery, 204–7, 210 government transfer payments as share of personal income, 206 Grant, Joseph M., 112, 120, 125 Great Depression banking industry, 119 Texas banking, 127–8 Great Recession border growth after, 208–10 energy-related rebound, real estate and, 116–17 exports and, 159–60 oil boom and, 79 Texas banking, 134–5 Green, D., 80 Greider, Erica, 37 Gribble, J N., 62, 65, 70 Grier, Kevin B., 41 Grijalva, Diego, 16–17 gross domestic product (GDP) growth, border economic recovery and, 205 state gross domestic product, 154–5 state gross domestic product, data, 146 242 INDEX gross receipts options, Texas margin tax and, 52–4 growth, boosting of, 39–42 growth, change in inequality and business climate ranking, 23 growth and industrial structure, border, 200–2 growth in banks and branches, 133 growth prospects, border economic recovery, 210–12 guaranty fund, Texas banking, 123–5, 127 Gumport, P J., 62, 64, 74 Gunther, Jeffery W., 127 Guvensoylar, Burak, 36 Gylfason, T., 80 Ham, John, 19 Hamden, Kristen, 202 Hamilton, Billy, 48–50, 53–6 Hanson, Andrew, 19 Hanson, Gordon, 93, 184–6, 188–9, 194 Hanson, Nancy, 225 health care, border economic recovery and, 201–2 Heintz, James, 41 Henchman, Joseph, 49 Henneberger, John, 227 Hernandez, Raul, 146 Higgins, Matthew, 41 high school versus college real hourly wage of workers, oil boom and human capital investment, 85, 86 Hill, Brian C., 42 hiring credits, job creation and, 15–17 Hispanic and Anglo age-education profiles Texas and U.S., 71, 72, 73 Holden, R J., 185 home health care employment, border economic recovery and, 207, 209 Hooks, Linda M., 127 hourly wages, oil boom and human capital investment, 84 household income, Las Colonias along the Texas-Mexico Border, 220, 221 housing, Las Colonias along the Texas-Mexico Border, 217–18 housing inventories, rising inflation-adjusted prices from early 1990s to shale oil boom, 115 Houston, Sam, 120 Hoynes, Hilary, 26 human capital See also educational attainment, oil boom and human capital investment overview, 6–7 Hymel, Kent, 41 Illinois, exports market gain, 175 ratio of revealed comparative advantage, with respect to, 173 improving infrastructure, Las Colonias along the Texas-Mexico Border, 216 indemnity, Texas banking, 123–4 industrial structure, border, 200–2 inflation, real estate from 1980s oil bust to the shale oil boom, 115 informal economy, Las Colonias along the Texas-Mexico Border, 221 infrastructure requirements, Las Colonias along the Texas-Mexico Border, 215–17 Jackson, Andrew, 120 Jaimovich, Nir, 92, 99 Jarosz, B., 64, 73 job creation employment growth, effects of state hiring credits on, 16 enterprise zones, 17–19 hiring credits, 15–17 state business climate and See state business climate and job creation subsidizing, 15–19 job growth See also employment growth by decade, 96–7 polarization and, 95–6 real estate from before 1980s oil bust to the shale oil boom, 110 Jones, Brian D., 41 Jordan, Amy, Katz, Lawrence, 91–3 Kazmierczak, Matthew, 36 Kearney, Melissa S., 91 Keen, Michael, 50 Keller, W., 168 Kendzor, Darla E., 202 King, Daniel, 224–5 INDEX Kolko, Jed, 41 Krueger, Alan B., 92 Krugman, Paul, 36 Kuka, Elira, 26 Kumar, Anil, 6, 116–17, 161 labor market overview, 6–7 polarization, employment growth and See employment growth, labor market polarization and Lake, Nicole, largest banking organizations in Texas, 129 Las Colonias along the Texas-Mexico Border, 213–29 classification system, 216 contracts for deed (CFDs), 217–18 developing talent, 223–5 earnings, lagging, 221–3 economic opportunity, 218 economy, Texas border, 220–1 education, lagging, 221–3 educational attainment percentage by area, 25 years and older, 222 future, 225–7 Hispanics earnings gap with increased education, 223 housing, 217–18 improving infrastructure, 216 informal economy, 221 infrastructure requirements, 215–17 introduction, 213–14 median household income, 220, 221 methodology, 214–15 poverty and near poverty rates, 219 public assistance recipients, 219 unrecorded contracts for deed (UCFDs), 217–18 words of community, 225–6 Layton, M Ross, 184, 185 Leachman, M., 65, 67, 74 Lee, Katherine J., 39 Lemieux, Thomas, 93 Lester, T William, 27 Levy, Daniel, 41 Levy, Frank, 92 liquidation rate, Texas state banks, 126 Livingston, G., 74 Llano Grande Center for Research and Development, 223–4 243 location quotients, employment border, 201 Lockwood, Ben, 50 LoPalo, Melissa, 6–7, 36, 97, 103 López, José Joaquín, 201 Lower-Basch, Elizabeth, 17 Lumina Foundation, 62, 64 Lundstrom, Samuel, 27, 28 Mackun, P., 61 Mahdavi, Alanis, 39 Mai, C., 65, 67, 74 main country competition in world markets, Texas, 164 manufacturing of exports, comparative advantage See exports, Texas comparative advantage and manufacturing of manufacturing productivity by state, exports, 168–72 maquiladora industry, 184–6 wages and employment, growth in, 188 margin tax See Texas margin tax, shortcomings of market gain, Illinois exports, 175 Márquez, Raquel R., 227 master’s degree or higher, population with, 70 McAfee, Andrew, 93 McGuire, Therese J., 41 McKinnish, T G., 80 mean real hourly wage, oil boom and human capital investment, 84 median household income, Las Colonias along the Texas-Mexico Border, 220, 221 medicaid enrollment, border region, 211 Mexico border See Texas-Mexico border, economic spillovers along exports, Texas comparative advantage and manufacturing of, 167 maquiladora industry, 184–6, 188 reforms, 211 Meyer, Bruce D., 42 minimum wage, increasing income and, 27–8 Mitchell, F., 62 Morrison, Catherine J., 41 Motor vehicles, exports, 167 Murdock, S H., 61, 62 244 INDEX Murnane, Richard J., 92 Muz, Jennifer, 103 Nadiri, I., 168, 177 NAFTA See North America Free Trade Agreement (NAFTA) National Association for Education Progress, 42 National Center for Public Policy and Higher Education, 65 National Research Council, 62, 64, 74 natural gas model, long-run variance composition for Texas employment, 147 production, 140 technology and changes in distribution, 144 Neumark, David, 16–17, 26–9, 41, 80 nonperforming loans, Texas banking, 131 North America Free Trade Agreement (NAFTA), 183, 202 North American Industry Classification System (NAICS), 160, 162 Obama, Barrack, 26 OECD See Organization for Economic Cooperation and Development (OECD) Ogunwole, S U., 62 Ohio, exports market gain, relative to Texas, 176 ratio of RCA with respect to, 174 oil boom, lowering of human capital investment and, 79–90 college degree or any college, percent of population with, 86, 87 college education, differences in share with, 87, 87–8 educational attainment, Texas before and after oil boom, 83 educational attainment, United States versus Texas, 82–3 high school versus college real hourly wage of workers, 85, 86 hourly wages, 84 human capital investment, overview of impact on, 86–8 introduction, 79–81 mean real hourly wage, 84 potential impact on human capital investment, 81–2 price boom and bust, 1970 to 2010, 80 wages, overall impact on, 84–5 worker percent share in oil and gas by educational attainment, 82–3 oil boom, real estate and See real estate from 1980s oil bust to the shale oil boom oil model, long-run variance decomposition for Texas employment, 147 oil prices, economic activity and, 141 oil production, reversing decades-long trend and, 143 oil products, revealed comparative advantage, exports, 165 O’Keefe, John, 112, 113 Organ, Elizabeth, Organization for Economic Cooperation and Development (OECD), 69, 70, 74 Osborne, Michael A., 93 overview, 3–11 banking, 7–9 border economy, 9–10 business climate, 4–6 Colonias, 9–10 energy, 7–9 exports, 7–9 human capital, 6–7 introduction, 3–4 labor markets, 6–7 public policy, 4–6 real estate, 7–9 taxation, 4–6 Patrick, J M., 185 Paup, Karen, 227 Pavlakovich, Vera K., 185 per capita outlays, 39 per capital growth output government expenditures and, 40 tax burden and per capita growth output, relationship between, 40 Perlmeter, Emily Ryder, 10, 227 Permian Basin, 141–4, 150–1, 153 Perna, L W., 61, 64–5, 72–3 Perry, Rick, 48 Perryman Group, 61, 64, 67, 73 INDEX personal income, transfer payments as share of, 206 Petersen, D’Ann M., 113, 129 petroleum products, exports, 165, 170, 172 Pharr-Sam Juan-Alamo School District, 224–5 Phillips, Keith R., 113, 129, 146, 195, 201–2, 204 Piketty, Thomas, 92 Plante, Michael D., 8, 211 Pogue, Thomas F., 50 population of Texas, growth of, 35 Potter, L., 62 poverty and near poverty rates, Las Colonias along the Texas-Mexico Border, 219 prices, energy See energy prices, impact of changing prices on Texas economy Proctor, Bernadette D., 92 production, energy prices and, 154 public assistance, Las Colonias along the Texas-Mexico Border, 219 public policy limitations of See public policy, role and limitations of overview, 4–6 role of See public policy, role and limitations of public policy, role and limitations of, 15–31 introduction, 15 job creation, subsidizing, 15–19 state business climate, job creation and, 19–24 work, increasing income from, 24–8 Quarterly Census of Employment and Wages (QCEW) employment growth, 16, 20, 21, 22 racial disparities, college education readiness, 66 railroad commission district, location of major shale formation by, 142 Ramos Francia, M., 162–3, 174 Ranieri, Lewis, 114, 118 RCA See revealed comparative advantage (RCA) 245 real estate, overview, 7–9 real estate from 1980s oil bust to the shale oil boom, 109–18 1970s and 1970s, 110–14 banking institution failures, 114 employment trends after 1980s oil bust, 111 energy-related rebound, 116–17 future, 117 The Great Recession and energy-related rebound, 116–17 inflation-adjusted house prices and, 115 introduction, 109–10 job growth (Texas) outpacing U.S., 110 low inventories, rising house prices and, 115 recovery and expansion in the 1990s, 115–16 residential construction, Texas and U.S compared, 113 unemployment rate in Texas during energy boom, 112 real government GDP growth, border economic recovery and, 205 Reich, Michael, 27 residential construction, real estate from before1980s oil bust to the shale oil boom, 113 return on average assets (ROAA), 131 revealed comparative advantage (RCA) California, exports, 173 exports, Texas comparative advantage and manufacturing of, 163, 166 Illinois exports, 173 Ohio, exports, 174 Reynolds, C Lockwood, 19 Rio Grande Valley, border economic recovery, 202, 204 Rios-Vargas, M., 62 ROAA See return on average assets (ROAA) Robb, Thomas Bruce, 124 Roberts, M., 168 Robinson, Kenneth J., 7, 8, 127, 135 robustness checks, employment growth, 98–100 Roder, Anne, 17 Rohlin, Shawn, 19 Ross, J., 62, 70 Ryan, Richard W., 99 246 INDEX Saez, Emmanuel, 92 Salas, J M Ian, 27 Sanders, S G., 80 Saucedo, Eduardo, Saving, Jason, 5, 43 Schwartz, Amy Ellen, 41 Schweitzer, Mark E., 42 Shale See specific topic Shane, Scott A., 42 Sickles, R., 168, 177 Silvers, Arthur L., 185 simplified economy, Texas margin tax and, 50–1 Siu, Henry E., 92, 99 Skelton, Edward C., 116, 117 skill premium, oil boom and, 85–6 Slijk, Christopher, 9, 10 smaller government, role of, 33–45 drivers of economic growth, 34–7 government per capita expenditures, 40 growth, boosting of, 39–42 implications for Texas, 42–3 introduction, 33–4 tax burden and per capita growth output, relationship between, 41 The Texas Model, 37–9 U.S growth and Texas growth, compared, 34–7 Smith, Morgan, 65, 74 Sommers, Benjamin D., 210 South Texas border metros, border economic recovery, 210 special assessments on state banks, Texas banking, 126 Sprinkle, Richard L., 185 state and country export data, exports, 161–2 state banking arrival in Texas, 121–2 state business climate and job creation, 19–24 contributions of business climate to employment growth, 22 Quarterly Census of Employment and Wages (QCEW) employment growth, 16, 20, 21, 22 state gross domestic product growth, 23 “tax and cost” indexes, 20 state gross domestic product, energy prices and, 146, 154–5 state margin tax revenue, Texas margin tax and, 48 state-chartered banks, capital requirements of, 124 Strayhorn, C K., 73 subsidizing, job creation, 15–19 Sullivan, T A., 66 Tannenwald, Robert, 41 “tax and cost” indexes, state business climate and job creation, 20 tax burden per capita growth output, relationship between, 40 state and local, Texas relative to national, 38 taxes margin tax See Texas margin tax, shortcomings of overview, 4–6 tax rates, disparity in effective, 52 The Texas Model and tax rate, 37–8 Taylor, Lori L., 41 TDHCA See Texas Department of Housing and Community Affairs (TDHCA) Texas banking, 119–37 annual return on average assets, 130 assets in national and state banks, 122 bank failures as share of all banks, 131 changing banking landscape, 131–3 deposit insurance system, 122–7 disposition of insured deposits at failed banks, 127 “double liability,” 122 early years, 119–21 factors, evolution of banking, 128–31 Great Depression, tranquility following, 127–8 Great Recession, 134–5 growth in banks and branches, 133 guaranty fund, 123–5, 127 indemnity, 123–4 introduction, 119 largest banking organizations in Texas, 129 liquidation rate, 126 national banking in Texas, 120 nonperforming loans, 130, 131 past, 135 private banking in Texas, 121 prosperous period, 133–4 INDEX return on average assets (ROAA), 131 special assessments in state banks, 126 state banking, 121–2 state-chartered banks, capital requirements of, 124 Texas ratio greater than 100 percent, ratio of banks with, 134 Troubled Asset Relief Program, 135 Texas border, Las Colonias along See Las Colonias along the Texas-Mexico Border Texas Constitution, 5–6, 120 Texas Department of Banking, 132 Texas Department of Housing and Community Affairs (TDHCA), 214, 217 Texas Education Agency, 66, 74 Texas Higher Education Coordinating Board, 66, 67 Texas margin tax, cost of goods sold (COGS)-deduction option, 55–6 economic framework, 50–2 evaluation, 48–9 gross receipts options, 52–4 implementation, 48–9 introduction, 47–8 key elements, 49–50 overview of, 48–50 shortcomings of, 47–58 simplified economy, 50–1 state margin tax revenue, 48 tax rates, disparity in effective, 52 turnover tax, 51–2 wage-deduction option, 54–5 The Texas Model, 37–9 per capita outlays, 39 tax burden, state and local, 38 tax rate, per capita output growth and, 37–8 Texas ratio greater than 100 percent, ratio of banks with, 134 Texas-Mexico border, economic spillovers along, 183–98 Border Industrialization Program, 184 city pairs, list of, 186 data and methods, 186–9 data description and sources, 198 empirical results, 189–94 247 employment estimation results, Texas border cities, 191, 191–2 employment estimation results, U.S border cities, 190, 191 employment growth by sector, 187 employment regression for Texas border cities with industry-varying coefficients, 193 employment regression for U.S and Texas border cities under different specifications, 194 employment regression for U.S border cities with industry-varying coefficients, 192 finance, insurance, real estate (FIRE) sectors, 192 introduction, 183–4 literature review, 184–6 maquiladora wages and employment, growth in, 188 Thies, J., 141, 145 Thompson, Fred, 38 Thompson, Jon, 38 Tienda, Marta, 6, 62, 66 Tomljanovich, Marc, 39 Torres, Luis, 8, 159 total factor Productivity (TFP) index, exports, 169 trade crossing border, border economic recovery and, 201 transfer payments as share of personal income, 206 transportation equipment, productivity, 171 Troubled Asset Relief Program, 135 Tullock, Gordon, 41 turnover tax, Texas margin tax and, 51–2 Tüzemen, Didem, 91 U.S growth and Texas growth, compared, 34–7 UCFDs See unrecorded contracts for deed (UCFDs) Ullrich, Laura, 42 unemployment rate in Texas from energy boom to Great Recession, 112 unrecorded contracts for deed (UCFDs) Las Colonias along the Texas-Mexico Border, 217–18 248 INDEX Varella Mollick, Andre, 185 variance decomposition for Texas employment, energy prices and, 147–8 vector autoregressive (VAR) model, energy prices and, 144–5, 157–8 Vedder, Richard, 39 Viard, Alan D., 5, 56 volatility, border city business cycles and, 203 wage growth by industry, 101, 102 wage quartiles, Texas and U.S., 94 wage-deduction option, Texas margin tax and, 54–5 wages, overall impact of oil boom, 84–5 wages and employment, growth in Texas-Mexico border, 188 Walsh, Carl E., 115 Warburton, Clark, 125 Ward, Peter M., 227 Warland, Chris, 17 Wascher, William, 26–8, 81 Way, Heather K., 227 Weaver, Findley, 120, 124–5 Weiss, Michael, White, Eugene N., 122 WICHE, 64, 65, 66, 71 Willis, Jonathan, 91 Wilson, S., 61 Wood, Lucille, 227 work, increasing income from and public policy, 24–8 earned income tax credit (EITC), 24–6 earned income tax credit (EITC) by income and number of children, 24 minimum wage, 27–8 state earned income tax credit, estimated effect on family income and poverty level, 25 worker percent share by educational attainment, oil boom and human capital investment, 82–3 world manufacturing products, by selected U.S states, 168 You, H., 62 Young, Andrew, 41 Young, Melissa, 17 Yücel, M., 8, 34, 113, 129, 141, 145 Zavodny, Madeline, 36 Zodrow, George, 56 .. .Ten- Gallon Economy Ten- Gallon Economy Sizing Up Economic Growth in Texas Edited by Pia M Orrenius, Jesús Cañas, and Michael Weiss TEN- GALLON ECONOMY Copyright © Federal... Cataloging -in- Publication Data Ten- gallon economy : sizing up economic growth in Texas / edited by Pia M Orrenius, Jesús Cañas, Michael Weiss pages cm Includes bibliographical references and index Economic. .. Booms Banking Institution Failures Concentrated in Texas During Savings and Loan Crisis, not in Recent Crisis Low Inventories Consistent with Rising Inflation-Adjusted House Prices in Texas National