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Cities are creatures of their state governments. As such, state policy can have important effects, intended or otherwise, on the well-being of cities and their residents. States affect cities in a variety of ways, and the importance to local governments of the state government role has long been recognized. States determine the institutional forms of their local governments, the land use and regulatory frameworks under which they operate, and the revenue systems they may use. Cities and their residents are directly affected by state tax policies and by state programs and policies. While some states have explicit “urban policies” directed at promoting the wellbeing of their cities, in every state cities are affected, adversely or beneficially, by a range of state activities not necessarily devised with cities and their residents in mind. This paper describes the initial stages in a research project that attempts to tease out how state policy effects the performance of cities. We first use factor analysis to explore the performance of central cities between 1990 and 2000 by measuring changes in a set of measures meant to broadly capture the economic and social well-being of city residents. We then employ linear regression to predict cities’ factor scores using a set of non-policy variables that describe the demographic characteristics and economic structures of the cities. By explaining performance using non-policy variables in this way, we attempt to isolate the potential impact of policy on performance, which should be captured in the unexplained variation in the cities’ factor scores. In the final part of our statistical analysis, we estimate how much of the unexplained variation can be attributed to state-level factors by using state fixed-effects models to predict the residuals from the previous stage regressions. The next stage in our research will be to use the state-fixed effects models as guides in choosing states for case study research. We will conduct a series of intensive case studies in both well- and poorly-performing states in order to determine how and why state-level policy affects the well-being of cities within those states.

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