Do Knowledge Spillovers Contribute to U.S. State Output and Growth?

This paper provides empirical evidence on the contributions of interindustry and interstate knowledge spillovers to the output and growth of state manufacturing industries. The work develops a method for detecting spillovers within the output equations of the Heckscher-Ohlin trade model. This method shows how knowledge spillovers can reverse the Heckscher-Ohlin patterns of comparative advantage. The findings indicate that knowledge spillovers across states are strong enough to reverse comparative advantage; however, knowledge spillovers across industries are not strong enough to reverse comparative advantage. The interstate knowledge spillovers are geographically localized and contribute substantially to state output and growth in manufactures.