A model of regional production is proposed which links local output to the distribution of income between owners and workers. In contrast to conventional regional production theories, our model is adjustment oriented, eschewing equilibrium for disequilibrium and certainty for uncertainty. The model demonstrates the integration of short-run events with long-run regional differentiation and technological change. Dynamic time-series estimates, based on US state and industry data provide support for the proposed relationships. Suggestions are also made for a new theory of regional output and employment.
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