The Neoclassical Economic Base Multiplier

In this paper we derive an analytical expression for the regional neoclassical economic base marginal employment multiplier. The model that we adopt is a variant of the 1-2-3 general equilibrium model used in trade analysis. Its specific neoclassical characteristics are that laborsupply is a positive function of the real consumption wage and that factor and product demands are price sensitive. We calculate the employment multipliers associated with both a demand and supply stimulus to the basic sector. We demonstrate that it is possible for the marginal economic base multiplier to take any positive or negative value. However, the value of the marginalmultiplier is likely to approximate the value of the conventional average multiplier the closer production and utility functions are to Cobb-Douglas specifications and the more elastic is the labor supply function.     

Robustness of econometrically estimated local multipliers across different methods and data

Local traded‐goods employment multiplier estimates play an important role in the decision making of local policy makers. Therefore, it is important to understand the robustness of the approaches and quality of the data used in empirical studies. The local employment multiplier estimates by Moretti (AER; 2010) are a good benchmark for departure. In this paper, I find the traded‐goods multiplier falls within the range of 1.17 to 1.93, which is substantially lower than the estimate of 2.6 obtained by Moretti. I use multiple estimators in combination with two data sets, a range of controls and different ways of classifying traded industries to show the robustness and variability of local employment multiplier estimates. Finally, I demonstrate the sensitivity of Moretti's results. The most notable result being that Moretti's multiplier for separate skilled or unskilled workers in the nontraded sector is overestimated by a factor of 2.     

The Net Effects of Large Plant Locations and Expansions on County Employment*

This paper argues that the net economic impact of new firm locations or expansions is determined by a multitude of opposing forces. Using a unique database, I set out to evaluate the net effects of these opposing forces by looking at the net change in local employment and population arising from large (greater than 300 new jobs) firm locations or expansions in the State of Georgia. The analysis suggests that the employment multipliers associated with new firm locations are much less than one; that is, the net employment effect of a large firm opening is smaller than the gross employment impact. This result is consistent with other empirical economic impact studies, which find multipliers much smaller than those of typical input–output models, often less than unity, and a previous study showing little net effect of large plant openings. Expansions of existing establishments are shown to have substantial multiplicative effects, however, with an average employment multiplier of 2.0. I discuss possible reasons for differential impacts across new and expanding firms, focusing on the nature of the firms. Differences in net impact across industries and high‐tech versus low‐tech firms also is evaluated. I find that the impact of large firm locations or expansions on population in the resident county generally is negative, but positive for the broader region encompassing the county of location and its contiguous neighbors.     

LEAST SQUARES ESTIMATES OF THE REGIONAL EMPLOYMENT MULTIPLIER: AN APPRAISAL*

Basically, we have attempted to show the following in the course of setting out the algebra of regression analysis of selected regional employment multiplier models: (1) When the basic features of the model are shaped by the assumption of an unlagged response of local employment to changes in export employment, the least squares estimates of the multipliers are highly sensitive to the export coefficients vector A, given the sample observation matrix X. In a completely disaggregated model such as Equation (21), the multipliers are solely determined by the export coefficients and thus are entirely independent of sample observations. However, this independence does not hold in the case of a partially disaggregated model. The identity relation is also destroyed when a lag relationship is introduced into a completely disaggregated model. (2) A simple lag model produces results bascially different from those obtained by an unlagged model if the overall differences between current and lagged observations are significant. (3) Given a matrix of sample observations on employment, it is possible to estimate the upper limits of a least-squares aggregate multiplier and its variance simply from knowledge of the export coefficients (4) The export coefficients vector has also an important bearing upon the correlation coefficient. The correlation is unity if and only if the export coefficients vector is proportional to the local employment coefficients vector, while it is zero if and only if the export coefficients vector is a vector all of whose elements are one. Also, the correlation coefficient is equal to one when a completely disaggregated model is used. There is finally the question of what these results mean in terms of the formulation of a multiplier model. First of all, in view of the crucial importance of the export coefficients and the difficulties of estimating them, most of the existing models do not seem to offer promising results. Furthermore, all the models examined here have made some simplifying assumption with respect to the constancy of the export coefficients. It remains highly uncertain whether these coefficients are reasonably stable over time. Of course, it would be theoretically more acceptable to relax the assumption of the invariance of export coefficients and to obtain such coefficients at different points of time for each industry. However, this would be accomplished only at the cost of increased difficulties of estimating larger numbers of export coefficients. In addition, there is some doubt as to the validity of the assumption that export employment is proportional to export sales. Since a lag relationship is important not only in terms of attempts to formulate multiplier models more realistically, but also in terms of its significant effect on the multiplier values obtained, the nature and the form of a lagged response and its estimation problems need to be investigated in depth. Finally, problems of least squares bias and efficiency, inference, and prediction which may arise in the context of various models presented here remain to be investigated. A detailed analysis of such problems must be the subject of further investigation.     

IMPLAN's Induced Effects Identified Through Multiplier Decomposition

An analysis of regional multipliers is developed to reveal a structural flaw in how IMPLAN computes induced effects. This analysis reveals a fixed ratio across sectors between total and Type I employment multipliers, and that IMPLAN's "Type III" income multipliers are inversely related to the average wages in the direct and indirect sectors, and that "Type III" output multipliers are not affected by wages. A multiplier decomposition is developed that separates direct and indirect effects from the induced and further separates the induced impact into relative wage and regional income retention effects. The decomposition is useful in making comparisons among impact models.     

Spatial Interpolation and Disaggregation of Multipliers

Most non-survey methods of estimating single-region multipliers have been shown to produce a systematic upward bias, unless a considerable amount of "superior" data is added. Here it is argued that this conclusion does not need to apply to the case of a non-survey, spatial disaggregation of multipliers. The method proposed consists of four steps with two substantive formulas. The first secures the non-survey interpolation of the lacking intra-regional multipliers for the smaller regions by means of regression. The second secures the non-survey spatial disaggregation of the inter-regional spillovers by means of second-order distance decays. The method is illustrated numerically by means of the interpolation and disaggregation of the 2 × 14 Type II biregional employment multipliers for aggregate Dutch regions into one 40 × 40 inter-regional employment multiplier matrix for the Netherlands as a whole.     

NONSURVEY INPUT-OUTPUT ESTIMATION TECHNIQUES: EVIDENCE ON THE STRUCTURE OF ERRORS

ABSTRACT This paper concerns the nature and extent of error introduced to regional input-output multipliers by errors associated with the estimation of regional purchase coefficients (rpc's). Using the Washington State input-output model and computer simulations, estimates of multiplier error are generated for two distinct sources of rpc error. The results indicate that multiplier error from both rpc sources may be significant and support the findings of previous studies which highlight the importance of error introduced to the household purchases column for multiplier accuracy.     

WHEN AND HOW DOES COMMUTING TO CITIES INFLUENCE RURAL EMPLOYMENT GROWTH?

This paper estimates the influence that rural‐to‐urban commuting has on rural employment growth, and whether the strength and spatial reach of this effect depend on commuters’ levels of education. A main finding is that rural‐to‐urban commuting has a robust positive impact on rural employment growth in services and retail. There is no significant difference in how far these effects reach into rural Sweden for commuters with different levels of education. These results suggest that a viable policy for local employment growth in rural areas with reasonable commuting times to urban centers is to improve the commuting to urban centers.     

Polarization and the growth of low‐skill service jobs in Spanish local labor markets

This paper analyzes the long‐term transformations of the occupational structure in 50 provinces of Spain with a view to ascertain the existence and assess the extent of employment polarization. The peculiar characteristics of this country, namely rigid labor markets and the relatively recent transition to democracy, make for an interesting addition to existing studies on this topic. In line with previous literature on other countries, we find a strong association between the decline of “routine” mid‐skill jobs and the expansion of low‐skill service employment as well as differential labor market outcomes by levels of formal education. Results are robust to various controls and instrumental variables that account for long‐term industry specialization. We also find a positive local multiplier effect of high‐skilled workers on the demand for nontradable service jobs.     

NoteAbout the Concept of "Net Multipliers"

Net multipliers, as introduced by Oosterhaven and Stelder (2002) accept outputs as entries instead of final demand. They are found by multiplying ordinary multipliers by the final demand ratio over the sector's output. This pragmatic solution suffers from ratio instability over time. The alternative net multipliers proposed here are based on the interpretation of the Leontief inverse matrix for the effects generated at each round. The new solution is not sensitive to the size of impacts. Now net multiplier is equal to the corresponding ordinary multiplier minus one, and the ordering of multipliers is unchanged.     

War-related excess mortality in The Netherlands, 1944–45: New estimates of famine- and non-famine-related deaths from national death records

Despite there being several estimates for famine-related deaths in the west of The Netherlands during the last stage of World War II, no such information exists for war-related excess mortality among the civilian population from other areas of the country. Previously unavailable data files from Statistics Netherlands allow researchers to estimate the number of war-related excess deaths during the last stage of the war in the whole country. This study uses a seasonal-adjusted mortality model combined with a difference-in-difference approach to estimate the number of excess deaths in the period between January 1944 and July 1945 at a total of close to 91,000 (75%) excess deaths. Almost half of all war-related excess mortality during the last year of the war occurred outside the west.     

SPATIAL HEDONICS AND THE WILLINGNESS TO PAY FOR RESIDENTIAL AMENITIES*

ABSTRACT We investigate the role of spatial multipliers when using spatial‐lag hedonic models to measure the benefits of residential amenity improvements. Such benefits are commonly measured using the product of the coefficient of the amenity in question and a spatial multiplier. We show this is correct only when the spatial spillovers transmitted through the multiplier are strictly technological. If they are instead strictly pecuniary, then benefits are fully measured using the coefficient with no spatial multiplier. In either case, or in intermediate cases where both types of spillovers exist, a spatial‐lag specification is required to obtain valid benefits measures.     

A SIMPLE METHOD FOR ESTIMATING QUARTERLY LOCAL-AREA PERSONAL INCOME*

ABSTRACT A single-equation econometric approach is developed for estimating personal income on a quarterly basis for counties and county aggregates (e.g., metropolitan areas). An experiment is conducted on state data to test the accuracy of the estimates. The experiment indicates that they would be highly accurate for large local areas; for local areas comprising at least 20 percent of their state's total personal income, the estimates would fall within 2 percent of BEA-type estimates 95 percent of the time. An aggregate estimation approach is shown to be preferable to a component approach. Using data on local department store sales, the quarterly personal income estimates are shown to forecast better than the currently available annual estimates.     

ON THE BIAS OF MULTIPLIER ESTIMATES*

ABSTRACT. This paper considers the bias of the matrix of multipliers when the underlying data are random. The traditional approach is to specify the stochastic nature of the input coefficients directly. It is shown that this approach implies a transactions table which is biased in a most unbalanced way. Next the practitioner's point of view, i.e., taking the transactions table as the source of random errors, is adopted. One of the results states that, within each row of the multiplier matrix, either the biases are zero, or positive biases are canceled out by negative biases in the sense that their weighted average is zero. The conditions are based on the idea that information on aggregates is more exact than information on their details. The usual asumptions of independence and unbiasedness of the individual errors are avoided. The results are shown to have a direct interpretation in connection with the RAS-updating procedure.     

An empirical examination of shift-share instruments

Bartik's (1991, 1993) approach to identifying shocks in demand to regional economies has been used extensively for nearly 30 years. We chronicle the development of Bartik-type shift-share instruments and examine the empirical performance of alternative versions that use different combinations of national shift and local share variables in their construction. We offer three main findings. First, instruments constructed from shares that omit employment in nontraded sectors empirically dominate versions that include total employment. Second, industrial sectors with high average shares and low variation across areas are more likely to be nontraded and endogenous. This suggests placing large weights on nontraded sector shares worsens both relevance and potential endogeneity. Finally, we demonstrate national shifters other than employment, such as prices and wages, can be used to construct instruments with unique and relevant explanatory power.     

Economic Interdependence Within the Chicago Metropolitan Area: A Miyazawa Analysis

The present study explores the nature and strength of economic interdependence between inner-city communities and suburbs within the Chicago metropolitan area. Employing Miyazawa's extended input-output framework, a multiregional model is used to investigate the interdependence of income formation and output generation. The metropolitan area is divided into four regions and particular attention is directed to predominantly minority areas on the south and west sides of the city of Chicago. The region-to-region impacts of trade flows and their associated multipliers proved to be far less important in determining the strength of interregional interdependence in contrast to income flows derived from journey-to-work movements. The interrelational income multiplier revealed considerable interdependence between regions although the strength of this interdependence was asymmetric.     

Job polarization in the new economy in Danish cities: location,size, and the role of the public sector

ABSTRACT

In this paper we examine the geographic patterns of employment growth and employment polarization in small and medium-sized cities (SMCs) in Denmark during the rise of the new economy. The geography of employment polarization in Danish cities is examined using register-based employment data on occupations and wages divided into the public and private sectors in the period 1993–2006; it therefore covers a long period of transformation and growth in the Danish economy. We conclude that employment growth is characterized by employment polarization combined with growth in low- and high-wage employment and a decline in medium-wage employment. However, these patterns of polarization differ across the public and private sectors, as well as by geography. While local labour market (LLM) size, city position and city specialization influence the geography of private-sector employment growth and polarization, municipal population and composition influence the geography of public-sector growth patterns across wage levels. Finally, public and private employment are positively associated within SMCs, predominantly driven by the positive association between public employment and private-sector low-wage employment. However, public employment is not associated with an increase in private low-wage employment in more remote areas.     

ENTREPRENEURSHIP,INFORMATION, AND GROWTH

We examine the contribution to economic growth of entrepreneurial marketplace information within a regional endogenous growth framework. Entrepreneurs are posited to provide an input to economic growth through the information revealed by their successes and failures. We empirically identify this information source with the regional variation in establishment births and deaths. To account for the potential endogeneity caused by forward‐looking entrepreneurs, we utilize instruments based on historic mining activity. We find that the information spillover component of local establishment birth and death rates have significant positive effects on subsequent entrepreneurship and employment growth for U.S. counties and metropolitan areas.     

MULTIPLIER ESTIMATES: TO BIAS OR NOT TO BIAS?*

ABSTRACT It is well known that multiplier estimates within an interindustry context may be biased when the input coefficients are stochastic. Several conditions have been derived under which the estimates were shown to be biased, all with the same sign. In contrast to these analytical results, however, simulations using a stochastic transactions table unexpectedly reported the unbiasedness of multiplier estimates. This note argues that the sample sizes were too small. It is shown that for increased sample sizes the multiplier estimates are all positively and significantly biased, in line with the analytical results, but the biases are very small.     

Spatial Autocorrelation Statistics of Areal Prevalence Rates under High Uncertainty in Denominator Data

We propose a new estimator of spatial autocorrelation of areal incidence or prevalence rates in small areas, such as crime and health indicators, for correcting spatially heterogeneous sampling errors in denominator data. The approach is dubbed the heteroscedasticity‐consistent empirical Bayes (HC‐EB) method. As American Community Survey (ACS) data have been released to the public for small census geographies, small‐area estimates now form the demographic landscape of neighborhoods. Meanwhile, there is growing awareness of the diminished statistical validity of global and local Moran’s I when such small‐area estimates are used in denominator data. Using teen birth rates by census tracts in Mecklenburg County, North Carolina, we present comparisons of conventional and new HC‐EB estimates of Global and Local Moran’s I statistics created on ACS data, along with estimates on ground truth values from the 2010 decennial census. Results show that the new adjustment method dramatically enhances the statistical validity of global and local spatial autocorrelation statistics.