Based on an estimated dynamic spatial Durbin model, we find that the direct effect of a one-point increase in a county’s inequality is associated with a 3.3% decrease in its growth, while one-point increases in inequality in a county’s neighbors decrease its growth by 4.8%.

I use a spatial Durbin model to estimate the effects of taxes on state economic growth. Results indicate that taxes have negative short-run and long-run own-state and spatial spillover effects on state growth.