November 1991
Federal Reserve Bank of Dallas

Economic Review was published until 1999.

Income Growth in the Southwest: Implications for Long-Term Development
Robert W. Gilmer

Many observers view economic diversification as the antidote for the Southwest’s boom-and-bust cycles and as the key to long-term economic growth. Robert W. Gilmer addresses this issue by analyzing whether regional growth has been dominated by industry-specific cyclical factors or whether internal factors—such as labor force quality, infrastructure, and the educational system—have primarily accounted for long-term growth.

Gilmer’s analysis suggests that, for long-term growth, internal factors are more critical than industry mix. Gilmer concludes that policies designed to promote local investment in human and physical capital should be favored over those designed for the specific purpose of diversification. Internal factors are largely what prepare the region for the future.

The Effects of the Growing Service Sector on Wages in Texas
Keith R. Phillips

In Texas during the 1980s, service-sector employment rose, goods-sector employment declined, and the average real wage increased only slightly. Because service-sector jobs pay lower average wages than goods-sector jobs, analysts have suggested that the growing proportion of jobs in the service sector was an important factor suppressing overall wage gains in the state.

Keith R. Phillips finds that the increasing share of service-sector jobs only slightly dampened wage growth in Texas during the 1980s. Slow wage growth primarily resulted from weak wage expansion in both the goods and service sectors. Phillips also finds that the shift to service-sector jobs had little effect on wage inequality among workers in the state. While overall wage inequality increased, the increase resulted almost entirely from a large increase in wage inequality in the goods sector and a relatively small increase in wage inequality in the service sector.