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.     

Spurios Spatial Regression: Some Monte Carlo Results with a Spatial Unit Root and Spatial Cointegration

In this paper I introduce the concepts of spatial unit roots and spatial cointegration, and via Monte-Carlo simulation I illustrate their implications for spatial regression. It is shown that spatial unit roots lead to spurious (spatial) regression, as in the well-known case involving time-series. Spatial cointegration is similar to its time-series counterpart, although I demonstrate that OLS estimation of spatial error-correction models is not consistent.     

A ROBUST APPROACH TO PREDICTING FLUCTUATIONS IN STATE-LEVEL EMPLOYMENT GROWTH*

ABSTRACT. Economic forecasting models are famous for performing well over short time periods and then suffering rapidly deteriorating performance when economic conditions change. This behavior makes composite forecasting models valuable in situations where large forecast errors cause considerable losses. A composite forecasting model for state-level employment is proposed here. This method is designed to protect state budget processes by producing robust forecasts of changes in employment and the related revenue collections. An application to Georgia nonagricultural employment is presented which demonstrates the benefits of this technique. The example shows that the method can forecast such series accurately without the forecaster having to choose in advance a single model specification to all economic conditions.     

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.     

A Spatial Prior for Bayesian Vector Autoregressive Models

In this paper we develop a Bayesian prior motivated by cross-sectional spatial autoregressive models for use in time-series vector autoregressive forecasting involving spatial variables. We compare forecast accuracy of the proposed spatial prior to that from a vector autoregressive model relying on the Minnesota prior and find a significant improvement. In addition to a spatially motivated prior variance as in LeSage and Pan (1995) we develop a set of prior means based on spatial contiguity. A Theil-Goldberger estimator may be used for the proposed model making it easy to implement.     

REGIONAL GROWTH IN THE SOVIET ECONOMY A MODEL AND ANALYSIS*

A multiregional econometric model of the Soviet economy is presented. It consists of 1,391 equations, with time-series information for 1965-1980. In conformity with the number of the country's republics, 15 input-output tables are incorporated. The discussion includes the methodological framework, the structure and equations, theoretical justification for the interaction between the econometric and input-output components, data and estimation, and forecasting results.     

Time-series modeling of gross migration and dynamic equilibrium

Firstly, the high association between in- and out-migration is investigated in a time-series context and modeled according to three categories: 1) job transfer, 2) job search and marriage, and 3) return migration. Under certain coditions it is shown that aggregation of these migrations yields a bivariate time-series model having feedbacks in both directions. Secondly, the recent phenomenon of sharp changes in net migration seems to be discontinuous and, hence, catastrophic modeling [Casetti (1981) may be appropriate. However, this paper considers gross migration between cores (metropolitan areas) and peripheries (rest of the nation) for which a continuous function seems adequate. This is done by introducing a multivariate time-series model. This model is empirically supported, especially in Japan, divided into 32 regions, by t-tests and Durbin-Watson ratios, although it excludes economic variables such as employment growth and wage differentials. This may imply that the recent dispersal from core to peripheral regions could be explained primarily by feedback from return migrants. Finallym, provided future streams of gross migration follow the past trends given by simultaneous equation estimates, in-migration and out-migration would approach a stable state in most regions. Irrespective of random shocks in the future, in- and out-migration would tend to approach a stable equilibrium. According to the estimation of the stable states, the 45 core regions in the US would continue to lose population through net outflows while those in Japan would continue to gain. The present model may thus be valid only for short-term forecasts. By introducing feedback and lag structures, however, it does offer one explanation for the recent population turnaround.     

THE MEDIAN VOTER,VOTING, AND LOCAL GOVERNMENT EMPLOYMENT*

ABSTRACT This paper provides an explanation for the level of local government employment by developing a median voter model that allows for migration into and out of the city, a local government balanced-budget constraint, and voting behavior by public employees that reflects their role as both demanders and suppliers of local government goods. Unlike previous research, the model developed here explicitly considers voting (for the incumbent) probability density functions which furthermore need not be stationary. The main conclusions of the model are that, ceteris paribus, it is plausible that the level of local government employment varies inversely with the public employee wage demand and with the elasticity of the privately employed voting population with respect to the local tax rate but directly with the voter participation rate of public employees. Contrary to previous theoretical research, there is no determinate relationship between the level of local government employment and the voter participation rate of privately employed citizens. Inferences concerning the structure of local government are also discussed.     

Socio-Economic Impacts of Locating a Nuclear Waste Repository in Sweden

This paper examines possible socio-economic effects of locating a nuclear waste repository in a rural region of Sweden. In particular, the aim is to analyse the local population and employment developments induced by the construction and operation of a storage facility. A socio-economic impact model has been constructed in order to amalgamate estimations of demand, linkages and production conditions within different sectors of trade and business as well as the public sector. The combined employment and trade-and-business projection is integrated with a demographic prognosis model. A result of the analysis is that the local employment and population impacts are considerable, but the effect is not sufficient to compensate for the long-term negative population and employment trends.     

A few “big players”: Systems approach to immigrant employment in a mid-sized city

Canada's immigration policy is regarded globally as a best practice model for selecting highly skilled migrants. Yet, upon arrival many immigrants face challenges integrating into employment. Where immigrants settle is one factor that has been shown to impact on employment integration. In Canada, regionalization policies have resulted in more immigrants settling in small to mid-sized cities. It is important to understand how these local systems are organized to promote immigrant integration into employment. Using a systems approach, this paper presents a case study of immigrant employment in a mid-sized city in Ontario, Canada. Through a document review and stakeholder interviews, a systems map was developed, and local perspectives were analyzed. Results demonstrate that in a mid-sized city, few organizations play a large role in immigrant employment. The connections between these core organizations and the local labour market are complex. Any potential challenges to the system that interfere with these connections can cause a delay for newcomers seeking employment. As cities begin to experience growth driven by immigration, there is a need to ensure local services are not only available but also working effectively within the larger employment system.     

CENTRAL CITIES AND SUBURBS: ECONOMIC RIVALS OR ALLIES?*

ABSTRACT Theoretical models of urban development come to contradictory conclusions regarding the nature of central city–suburb interdependence. Unfortunately, empirical research into this relationship has been hampered by the lack of identifying information due to the endogeneity of factors affecting both central city and suburban growth. This paper resolves the identification problem by constructing an index that measures price shocks to export industries located in either center cities or their suburbs. The results indicate that positive export industry price shocks to one area have a positive spillover effect on the other. Interestingly, the cross‐elasticity of suburban employment with respect to center city employment (1.18) significantly exceeds the cross‐elasticity of central city employment with respect to suburban employment (0.24).     

SUPPLY-SIDE MULTIREGIONAL INPUT-OUTPUT MODELS*

ABSTRACT This paper introduces a new class of supply-side multiregional input-output (MRIO) models and provides the necessary and sufficient conditions on the regional trade matrices that ensure that a generalized supply-side model will be convergent. The paper also introduces a new version of the row coefficient model, conceived as the “mirror image” of the Chenery-Moses demand-side column coefficient MRIO model. Given that the conventional supply-side input-output model has been shown to perform equally as well as the demand side model in forecasting exercises, the supply-side MRIO model is expected to be of value for policy and planning purposes. Moreover, this model is of potential theoretical value for a broad synthesis of demand-side and supply-side MRIO models.     

MODELING DYNAMIC INTERINDUSTRY REGIONAL GROWTH IN THE PRESENCE OF STRUCTURAL SHIFTS AND OUTLIERS*

ABSTRACT. Kraybill and Dorfman (1992) propose a model of intermediate and export demand which uses ordinary least-squares and linear systems techniques to produce a state-space representation of the time element of output change. Their model produces dynamic multipliers which trace the temporal path of regional growth, and has many advantages over previously employed time series methods. This study extends their methodology to accommodate structural shifts and outliers found in the least-squares relationship between industry and export output by using a recently-introduced technique–multiprocess mixture estimation. An application of the Kraybill-Dorfman method and the extensions proposed here to monthly time series data on Ohio employment is used to illustrate these issues.     

Gender, space, and the location changes of jobs and people: a spatial simultaneous equations analysis

This article summarizes a spatial econometric analysis of local population and employment growth in the Netherlands, with specific reference to impacts of gender and space. The simultaneous equations model used distinguishes between population- and gender-specific employment groups, and includes autoregressive and cross-regressive spatial lags to detect relations both within and among these groups. Spatial weights matrices reflecting different bands of travel times are used to calculate the spatial lags and to gauge the spatial nature of these relations. The empirical results show that although population–employment interaction is more localized for women's employment, no gender difference exists in the direction of interaction. Employment growth for both men and women is more influenced by population growth than vice versa. The interaction within employment groups is even more important than population growth. Women's, and especially men's, local employment growth mostly benefits from the same employment growth in neighboring locations. Finally, interaction between these groups is practically absent, although men's employment growth may have a negative impact on women's employment growth within small geographic areas. In summary, the results confirm the crucial roles of gender and space, and offer important insights into possible relations within and among subgroups of jobs and people.     

Does size of local labour markets affect wage inequality? a rank-size rule of income distribution

The questions addressed in this paper are: (i) does wage inequalityincrease with local population size, and if so, (ii) what arepossible factors behind this increase? In a cross-section analysisof Swedish local labour markets using unique full populationdata, the article shows that urban scale, i.e. size of localpopulation, has significant positive effects on wage inequality.Testing for potential explanations, labour market diversification,human capital, migration, age structure and employment are shownto be significantly associated with inequality. Given theseeffects, the article raises the question of how to understandand incorporate scale effects into models of long-term changein wage inequality.     

Illegitimate fertility decline in England, 1851-1911

This study attempts to determine the extent to which several hypotheses are able to account for the illegitimate fertility decline in England in the second half of the nineteenth century. The results of a pooled time-series analysis are consistent with the hypothesis that a rise in working-class prosperity accounts for much of the decline. Additional reasons for the decline, which cannot be ruled out with the data used in the analysis, include the diffusion of knowledge and the acceptability of contraceptive methods and a decline in agricultural employment.     

Assessing the Impact of Location on Women's Labor Market Outcomes: A Methodological Exploration

Location and the nature of locally available employment opportunities is believed to shape labor force participation, job type, and wages. Analysts investigating this issue have encountered problems in operationalizing the concept of “locally available employment opportunities.” We first review the grounds for expecting a relationship between local context and employment outcomes for women and then critically assess the methods and measures that analysts have used to explore the relationship. Finally, we describe a new approach for measuring local employment context that consists of a fine-scaled measure individually tailored for each woman in the sample. Using discriminant analysis we ask whether the spatial variables measuring local employment context are important determinants of women's employment in female-dominated occupations. The results suggest that for most groups of women (defined by city or suburban residence and by sociodemographics) the spatial variables are not important. For well-educated, part-time employed women with young children, however, living in an area rich in female-dominated job opportunities increases the likelihood of having a job in a gender-typical occupation; for these women, the local employment context does affect labor market outcomes.     

Missing an opportunity: the Italian Mezzogiorno's trading troubles during European integration

Among the many troubles that southern Italy's economy is facing, its deficient trade performance receives little attention. Yet the Mezzogiorno's comparative disadvantage in trade is a recurring theme in the long history of Italian inter-regional disparities. Adverse conditions for firms in tradeables persist while European integration opens up new opportunities for this sector to expand. In this paper, a dataset of employment rates in tradeable and non-tradeable sectors from 2000 to 2010 is constructed to analyse the strength and development of the Mezzogiorno's export base during European integration. The analysis shows that the new trade opportunities alone did not suffice to even the Mezzogiorno regions' road to export orientation.     

DEFENSE SPENDING AND STATE ECONOMIC GROWTH*

Little evidence is currently available on the regional growth effects of federal defense spending. In this study, econometric models for state personal income and manufacturing employment between 1976 and 1985 are specified and estimated. Pooled cross-sectional time-series data are used, and the estimation procedure corrects for serial correlation, heteroscedasticity, and contemporaneous cross-sectional correlation. The results indicate that aggregate defense spending has a positive effect on both growth measures. However, when defense expenditures are disaggregated, only investment-type outlays appear to consistently affect state economic growth.     

Principal Component Regression in Spatial Lag Model: Teen Employment in the City of Rosario,Argentina

Teen employment is a very important socioeconomic phenomenon because of its consequences on human capital formation. We assess the relation between teen employment and poverty, education, and unemployment in the city of Rosario, using information from the 2010 Argentina Census disaggregated at census block level. We use two different spatial models: The spatial lag model (SLM) and a linear regression model with the spatial component filtered (filtering model, FM). Given the nature of the variables employed, multicollinearity is an issue. One of the techniques proposed in the literature to deal with multicollinearity problems is principal component regression (PCR). We develop an adaptation of such methodology to be used in the SLM. Both models are estimated using their traditional methodologies (instrumental variables for the SLM and OLS for the FM) and using PCR. Although results are similar between the two models, depending on the methodology used in the estimations they differ greatly. Under traditional methodologies estimations show high variability, instability, and contradictory outcomes, but under PCR, results behave according to the literature.