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Comparative Advantage and Job Formation in California and Texas
1University of California, Los Angeles University of California, Los Angeles
Citation Information: California Journal of Politics and Policy. Volume 3, Issue 1, Pages –, ISSN (Online) 1944-4370, DOI: 10.2202/1944-4370.1154, September 2011
- Published Online:
By most measures the economy of the state of Texas is doing better than that of California. Texas has an unemployment rate 4% below California, it is considered to have a more conducive business climate than California and its attractiveness has caused immigration rates to Texas to be the highest in the nation. In this article we examine the “Texas Miracle” in the context of comparative advantage. By framing the analysis through the lens of the economic theory of specialization, we find that Texas is indeed doing better, but only in as much as it would be expected to do so even in the absence of lower taxes and better business climate. This then suggests that the policy discussion with regard to California job formation should be centered on how California can enhance its comparative advantage and facilitate job formation rather than how California can mimic other states or prevent the relocation of business to other states.