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Illustrations 1.1. Trajectory of U.S. living standards 6 1.2. Decline of U.S. income growth rates in the twentieth century 7 1.3. Comparison of state economies (in real income per capita), 1969–99 11 1.4. Distribution of state growth rates, 1969–99 14 1.5. Comparison of state economies (in real income per worker), 1969–99 15 1.6. Changes in relative living standards over three decades (in income per capita) 21 1.7. Changes in relative living standards over three decades (in income per worker) 23 2.1. End of state income convergence 26 2.2. Pattern of convergence in state income per worker 27 3.1. Regression Volatility index, income per capita 38 3.2. Innovation Volatility index, income per capita 39 3.3. Regression Volatility index, income per worker 40 3.4. Innovation Volatility index, income per worker 41 3.5. Estimated trade-off between volatility and income per capita 46 3.6. Estimated trade-off between volatility and income per worker 47 4.1. Changing composition of state tax revenues 52 4.2. Convergence/divergence among states in the structure of taxes 55 4.3. Convergence/divergence among states in average tax rates 56 7.1. State spending growth compared to income growth, 1969–98 83 7.2. State spending growth compared to federal spending relative to income, 1969–98 84 7.3. Comparison of state spending growth (in real spending per capita), 1969–98 86 7.4. Comparison of state spending growth (in spending relative to income), 1969–98 87 7.5. Effect of initial government size on growth in spending per capita 88 7.6. Effect of initial government size on growth in spending relative to income 89 7.7. Convergence among states in spending per capita 90 7.8. Convergence among states in spending as a share of income 91 7.9. Changes in relative spending over three decades (in spending per capita) 92 7.10. Changes in relative spending over three decades (in spending relative to income) 94 8.1. Uncertainty of future funding levels and agency costs 98 8.2. Trade-off between budget volatility and spending per capita 109 8.3. Trade-off between budget volatility and spending as a share of income 110 9.1. Major components of state budgets in 1998 120 9.2. Major components of state budgets in 1969 120 9.3. Comparative growth in major budget components, 1969–98 122 9.4. Convergence/divergence among states in budget priorities (spending per capita) 124 9.5. Convergence/divergence among states in budget priorities (spending as a share of income) 125 9.6. Convergence/divergence among states in budget priorities (spending as a share of total state budget) 126 9.7. Effect of citizen and government ideology on total spending 135 9.8. Effect of citizen ideology on budget priorities 136 xii Illustrations ...

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