Bruce Hall says changing dynamics in Kansas have meant that a simple average difference (what I’ve called a individual state fixed effect) in Kansas-US unemployment rates is misleading — or more succinctly put, “the average obfuscates the trend”. So, I allowed a time trend and a square in time trend, in a regression over the 1976-2010 period (data series start in 1976; Brownback takes power in 2011). The t-stats on both coefficients are highly significant. Here is a picture of actual Kansas-US difference and the quadratic trend.
Figure 1: Kansas-US unemployment rate difference, in %, seasonally adjusted (blue), and quadratic fit (red), and 68% prediction interval (gray). NBER defined recession dates shaded gray. Out of sample period shaded green. Source: BLS, NBER, author’s calculations.