A NEOCLASSICAL ANATOMY OF THE ECONOMIC BASE MULTIPLIER*

ABSTRACT Keynesian export base theory ignores the supply side of the economy, while trade models may overemphasize resource constraints. A general equilibrium model which stakes out a position between those extremes is developed and used to define rigorously the components of an economic base (EB) multiplier. Capital moves freely in and out of the regional economy, but the factor land is fixed. Interregional labor movements are caused by wage differentials. Factor and relative commodity prices are determined endogenously. Demand and supply sides of a small regional economy are included. The relationship between average and marginal EB multipliers, and between key parameters (regional size, several elasticities, etc.) and the marginal multiplier are discussed. The Keynesian constant EB multiplier can be derived from a special case of the model.     

A PRACTICAL NOTE ON THE NEOCLASSICAL ECONOMIC-BASE MARGINAL MULTIPLIER*

Computation and usage of my neoclassical economic-base marginal multiplier formula (Merrifield, 1987) is simplified. The note points out the economic parameters that must be estimated with some care and for which rough approximations suffice. It also indicates when the size of the multiplier will be significantly affected by the source of the exogenous stimulus (factor- or output-price change). The traditional bifurcation effort must be supplemented with careful estimates of only a small subset of the other parameters. For most of the simulated parameter combinations, the multiplier based on exogenous factor-price changes differed from the multiplier based on output-price changes by less than 10 percent.     

Resource‐Constrained Export‐Base Regional Multipliers: A Northian Approach*

Abstract. This paper attempts to rescue the regional export‐base growth model from a purely demand‐side interpretation. It formally develops the classic Northian approach, where the exploitation of region‐specific resources by export‐orientated production sectors determines regional growth. In this model, the nature of the regional expansion is shown to be stimulus‐specific with the value of the marginal export‐base multiplier varying within very wide limits, depending upon key characteristics of the region and the nature of the supply‐side shock to the export base.     

Local employment multipliers for large publicly subsidized firms: Evidence from a synthetic control approach

This paper provides estimates of local employment multipliers from large, publicly subsidized firms. We use a synthetic control weighted difference-in-difference estimation procedure that matches treated areas with comparison areas to generate local employment multiplier estimates. We show that local employment multiplier estimates have a high degree of uncertainty, with a wide range of point estimates (both positive and negative) and varying degrees of statistical significance. There is a concentration of positive employment multipliers from manufacturing facilities, but little correlation between estimated multipliers and subsidy value. We demonstrate that our approach produces drastically different results than a traditional difference-in-difference approach.     

THE 1987 STOCK MARKET CRASH AND NEW YORK CITY EMPLOYMENT: AN INTERVENTION-MULTIPLIER ANALYSIS*

ABSTRACT. Intervention analysis is used to assess the impact of the October 1987 stock market crash upon employment in the securities industry in New York City. The results indicate that the crash has led to a gradual, but permanent reduction of approximately 25,000 jobs in this industry through July 1990. Using a dynamic location quotient methodology to measure basic employment, an estimate of a partial-adjustment economic base multiplier suggests that total New York City employment is likely to decline by over 100,000 as a result of the crash and subsequent adjustments in the securities industry.     

江苏省县域经济集聚和收敛的空间计量分析

通过探索性空间数据分析和空间计量分析方法,以实际人均GDP为测度指标,对江苏省65个县市的经济空间集聚、增长收敛性以及收敛机制进行讨论。研究发现1993-2009年实际人均GDP显示出越来越高的全局正相关,局部空间相关性也有增强的趋势。空间计量分析结果表明江苏省县域经济存在着β收敛,分时段研究为不同研究时段选择恰当的空间收敛模型后,收敛速度加快。技术扩散收敛机制和资本收敛机制分别在研究区间的前期和后期占主导作用,收敛机制的转变与江苏省在20世纪90年代末开始实行的区域协调发展政策密切相关。     

Employment Opportunities,Wages and International Migration in Sweden 1970–1989

In this study I focus on the impact of aggregate labor turnover and regional labor market conditions on gross in- and out-migration within the framework of a neoclassical flexible-wage (equilibrium) model and a fixed-wage (labor-market disequilibrium) model. Using annual panel data on internal gross migration flows in Sweden from 1970 to 1989, I find that regional differences in employment opportunities have the expected effects on migration. The empirical relationship between real wages and gross migration flows is found to be less congruent with theory implications, indicating that compensated regional income prospects are equalized primarily via the interaction between employment opportunities and gross migration flows. Cyclical changes in hirings are shown to have a robust and strongly significant positive scale effect on migration.     

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.     

Exports' Contribution to Economic Growth: Empirical Evidence for California,Massachusetts, and Texas,Using Employment Data

The paper shows an interregional trade model from which testable parameter restrictions for economic base theory, shown to be equivalent to the hypotheses of the Granger causality test, are derived. The results of the tests for three states, based on various bifurcation methods, suggest that economic base theory holds strongly for the crudest definition of the base, but not for others. The frequency analysis indicates a likely association between inherent cyclicalities in employment growth data and economic base theory. The regional multipliers and the timing of economic adjustments to exogenous shocks are also discussed.     

BALANCED BUDGET MULTIPLIERS FOR SMALL OPEN REGIONS WITHIN A FEDERAL SYSTEM: EVIDENCE FROM THE SCOTTISH VARIABLE RATE OF INCOME TAX

This paper explores the impact on aggregate economic activity in a small, open region of an income tax funded expansion in public consumption that has no direct supply‐side effects. The conventional balanced budget multiplier produces an unambiguously positive macroeconomic stimulus, but the incorporation of negative competitiveness elements, through the operation of the local labor market, renders this positive outcome less certain. Simulation using a single‐region Computable General Equilibrium (CGE) model for Scotland demonstrates that the creation of local amenity effects, and the extent to which these are incorporated into local wage bargaining, is central to the analysis.     

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.     

“We Simply Have to Do that Stuff for our Survival”: Labour,Firm Innovation and Cluster Governance in the Canadian Automotive Parts Industry

Based on a case study of the Canadian Auto Workers (CAW) union in southern Ontario we argue for a critical reconstruction of both the labour geography and industrial cluster literature. The former stresses the active role of labour in the formation of economic landscapes, but has yet to explore labour's agency in production and how labour institutions shape technological change, firm innovation and industrial policy and strategy. Conversely, much of the industrial cluster and regional innovation systems literature is silent on the role of unions and industrial relations institutions in fostering innovation. We conclude with two main points. First, while some contend that positive union roles in innovation can only stem from partnerships with management and team working, we argue that innovation is more likely to emerge and worker interests are better protected when traditional collective bargaining structures and progressive employment legislation play a central role. Second, positive workplace and cluster level cooperation in the Canadian automotive parts industry are jeopardized by the broader and ongoing macro‐economic restructuring of OEM global production networks due to over‐capacity and intense cost‐cutting pressures reverberating down the supply chain.     

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.     

THE STRUCTURE OF METROPOLITAN FACTOR AND PRODUCT MARKETS*

ABSTRACT. In this study we use a translog profit function and iterate seemingly unrelated regressions to estimate a system of factor demand and output supply functions for metropolitan economies. Our sample includes all metropolitan areas defined by the Census in 1977 for the period 1962 to 1982. Estimation shows that all price elasticities are elastic and that the signs are as expected. These results hold true for virtually all model specifications. Our findings indicate that federal, state, and local tax policies have significant impacts on factor demand and output supply. Public investment plays a positive and significant, but small, role in increasing output and in complementing other factors, although this influence has declined over time. Additionally, capital provided by the private sector has a substantially larger impact on output and employment than does capital provided by the public sector.     

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.     

Mixed-use ‘regeneration’ of employment land in the post-industrial city: challenges and realities in London

This article explores the relationships between land-use planning, property and economic development, with a focus on the changing attitudes towards employment land in post-industrial cities. Drawing on case study data from two London local authorities, it finds that planning authorities are moving away from protecting employment land to actively promoting the mixed-use redevelopment of employment sites, even when there are thriving businesses on these sites and a shortage of supply of employment premises and land, relative to demand. We examine the drivers for changing policy including the national and regional policy contexts, housing targets, the influence of austerity measures, rise of Neighbourhood Planning and changing conceptions of regeneration and the role of housing therein. The article highlights the complex task faced by local planners and the tensions involved in simultaneously finding sites for housing, fostering economic development and promoting mixed-use redevelopment in planning policy and decisions. We find that changes in policy are fuelling speculation for housing development on sites occupied by viable businesses, supporting rather than responding to deindustrialization. This is leading to a gap between aspirations for delivering mixed-use environments on hitherto employment sites and realities on the ground.     

Growth and Convergence in a Multiregional Model with Space–Time Dynamics. 多区域时空动态模型的增长与收敛

The goal of this article is to test four distinct hypotheses about whether the relative location of an economy affects economic growth and economic well‐being using an extended Solow–Swan neoclassical growth model that incorporates both space and time dynamics. We show that the econometric specification takes the form of an unconstrained spatial Durbin model, and we investigate whether the results depend on some methodological issues, such as the choice of the time span and the inclusion of fixed effects. To estimate the fixed effects spatial Solow–Swan model, we adjust the Arrelano and Bond (1991) generalized method‐of‐moments (GMM) estimator to deal with endogeneity not only arising from the initial income level, as in the basic model, but also from the initial income levels and economic growth rates observed in neighboring economies.     

THE EFFECTS OF TAXES,EXPENDITURES, AND PUBLIC INFRASTRUCTURE ON METROPOLITAN AREA EMPLOYMENT*

ABSTRACT. Data for 28 metropolitan areas over a 15-year period are used to determine the impacts of government spending, taxes, and public infrastructure on total employment and disaggregated employment. After carefully controlling for the government budget constraint we find that taxes are negatively related to total employment and education spending is positively related to total employment. Nevertheless, we find that it is difficult for metropolitan areas to influence the composition of their employment with government tax and expenditure policies. Moreover, at current levels of public infrastructure, marginal changes in infrastructure have no strong effect on employment.     

REGIONAL POPULATION–EMPLOYMENT DYNAMICS ACROSS DIFFERENT SECTORS OF THE ECONOMY*

ABSTRACT An important subset of the literature on agglomeration externalities hypothesizes that intrasectoral and intersectoral relations are endogenously determined in models of local and regional economic growth. Remarkably, structural adjustment models describing the spatio‐temporal dynamics of population and employment levels or growth traditionally do not include intersectoral economic dynamics. This paper argues and shows that allowing for economic linkages across sectors in these models adds considerable value, especially in forecasting. An econometric model of population–employment dynamics, in which sectoral variations in economic development are explicitly taken into account, is applied to a large urban planning policy proposal in the Netherlands. The empirical analyses suggest that population dynamics are largely exogenous, population changes drive employment in particular in the industry and retail sectors, and employment in all sectors depends strongly on intersectoral dynamics. Intersectoral dynamics appear as important drivers of regional sectoral employment changes; they are even more important than population changes, and their effect shows up clearly even within the Dutch institutional context where strict regulatory housing and planning restrictions are enforced.     

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.