Virginia Unemployment The economic situation differs from country to country, caused by difference in population, geography, monetary system, political situation and a lot of other factors. But even within one country there are always a number of regions that differ from one another by their economic performance. This situation is especially true for big countries like US. If the regions are too broadly defined, the economic diversity would be lost. If the regions are too narrowly defined, they are not likely to have any viability as economic entities, and this circumstance will increase the problem of developing good regional economic data pertinent to the individual regions.
Economic indicators like income, employment and population may differ in the rural and urban areas of a single region, but the growth of the region still depends on the economic performance of the region as a whole, and especially the towns and cities. An input-output model is very useful of measuring regional economic activity. Such a model effectively determines the impact of one economic variable on another can be used to analyze expected growth. The measure of regional economic indicators and comparing them to national could produce a good estimate of economic performance of a region. The regional economic model in case of the region within US could be compared with the model of a small country. And national model could be seen as an aggregation of many interrelated regional models.
This paper includes an estimation of the regional economic model The model is an attempt to estimate possible relationship within economic indicators. This paper also presents an analysis of regional economic indicators and national economic indicators in order to compare economic performance of the region and national economy as a whole. This model use annual national and state level data to produce regional estimates of income, employment, wages, population, labor force and the unemployment rate as a economic indicators for Virginia state as a region. Previous studies Regional scientists have long attempted to develop meaningful definitions and measures of economic diversity and diversification, and to establish functional relationships between diversity, diversification, and economic performance. The Regional economic models where (were) created to answer questions like “What is the relationship between a region’s changing economic structure and performance”.
Recent econometric models of regions were stressing macroeconomic relationship as a main idea of structuring of the model. A Number of models have been constructed for states and even smaller areas in order to find an effective forecasting tool linking the regional economic forecasting to the national economic forecast. Regional models were constructed as satellites to national models. Economic base theory views regional economic growth as being driven by exogenous final demands, notably exports. Input-output models are extensions of the economic base model, whereby intersectional economic relationships are explicitly considered Because of the underlying assumption that the regional economy is driven by exogenous final demands. The idea of regional economic model that is (instead of “that is” say “used”) in this paper is based on two studies that present economic models of regions in US. One study, reports on a regional economic modeling approach used by East Kentucky Power Cooperative, Inc.
(EKPC), a rural electric cooperative that serves 280,000 residential customers and 15,000 commercial customers in east-central Kentucky. These models use quarterly, county-level data to produce regional forecasts of income, employment, wages, population, labor force and the unemployment rate (1). Another study describes an economic model for state of Mississippi (2). Both studies indicated economic variables in regional output, labor, and income and wages blocks and estimated regressions on order(must be “in order”) to fine (must be “to find”) direction of dependence among variables. Both studies provide graphical interpretation of their models. Data Regional models often use data, which is allocated to the region, state or national level on the basis of employment, income or some other variable actually measured at the regional level.
Such data may serve the needs of particular model specifications and produce forecasts of variables. In this study, Virginia regional model uses a variety of national and regional data. The variables are summarized in (Appendix A). All variables were taken from University of Virginia Social Science Data Center (8). Gross domestic product (GDP), the featured measure of U.S.
output, is the market value of the goods and services produced by labor and property located in the United States. Because the labor and property are located in the United States, the suppliers (that is, the workers and, for property, the owners) may be either U.S. residents or residents of the rest of the world. So GDP was taken as an estimate of national Output, and it was measured in millions of Dollars. Growth State Product was taken as an estimate for Virginia State Output and it is presented in million of dollars.
Data for population in presented in number of persons both for Virginia and US. Data for unemployment includes all full-time and part-time employment and is presented in number of persons. Personal income includes wage and salary disbursements, other labor income, proprietors’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and transfer payments to persons. It is presented in millions of dollars. All data is a time series data for time period from 1975 to 1997 both for US (national) and Virginia (regional).
The problem with this data can arise because all data is inquiring with time and variables were regressed against closely related national. Model Structure and specification Economic model consists of output, labor, and income blocks. These blocks include economic indicators like regional output, population, employment, unemployment rate, wage and salary rate, and personal income. The output block Output of the region it a good estimate of business activity of the region. I could show how intensive the region is involved in creation growth domestic product.
The output could be measured as a physical number of goods and services that are produced in the region. But because of difference in the commodities it is hard to combine them all together, so it is better to present the output as Growth Domestic Product, in this case Growth State product of Virginia. Regional Output depends on National Output. Both outputs experience the same business cycle and increase in national output would stimulate regional economic growth, and the output of the region would increase. Population is a good estimate of the demand for output. With an increase in population region will also experience increase in demand for goods and services.
It gives an incentive for suppliers to produce more output. Population is also a supply of labor force that is a potential supply for new output. US wage and salary rate could be treated as an expense of production and it could have negative influence on output, or in case if it is higher than regional rate, then more output would be produced elsewhere. VaGSP = -211348.8 + 0.02 UsGDP + 0.045 VaPop – 1.5 UsW&S (-3.24) (4.96) (3.11) (-1.6) R=0.99 F=4675.87 National Output could be a good benchmark for Regional Output. Comparing two outputs the conclusion could made about regional performance.
National output could present an estimate of the average performance of all states in general. The figure of GDP is much bigger than Virginias GSP because it is a sum of all states’ GDPs together. With growing GDP, the growth rate of both variables will be a better basis for compression of regional and national output. The growth rater of GDP and Virginia GSP are plotted in Graph 1 Graph 1 GDP and Virginia GSP Growth Rate 1975-1997 Graph 1 shows that GDP and GSP are following the same paten, they are cointegrated. Form 1981 to 1987 the growth rate of GSP is exceeding GDP, and in 1997 they are almost the same. This means that on average Virginias output is moving with national output, so it is developing as fast as US.
GDP depends on population and it will increase with increase in population, so when comparing GDP and GSP it will be useful to take Per Capita date, so it will be free of influence of difference in population. Per capita GDP and GSP are presented in Graph 2 Graph 2 Per Capita GDP and Virginia GSP 1975-1997 Per capita GDP and Per capita GSP increase over the time. In 1983 per capita Virginias GSP became higher that per capita GDP and it still is in 1997. Since 1983 Virginia Per Capita GSP is 4.54% on average higher than Per Capita GDP. Labor market Block Three concepts are presented in labor market block: regional unemployment rate, regional employment and population.
Population Population of the region could play an important role in its development. Growth of population could stimulate economic activity, create new businesses and increase output or the region. Migration to a region can be an indicator of the region being more desirable to people in terms of standards of living. Population of the region could change due to demographic factors like birth rate or death rate or economic factors like availability of job higher wages and higher standards of living. So population could depend on average regional wage, or in this case wage and salary rate (wage and salary per job) and unemployment rate.
VaPop = 4395645.4 + 83.08 VaW&S 18830.1 VaUnplR (44.93) (39.73) (-1.35) R=0.99 F=5656.6 As it was mentioned before, population of the region depends on some demographic factors along with economic. So the purpose of this equation is to try to explain reason for population to migrate from one region to another. People tend to move to regions where they have better economic conditions. In this case wage and salary rate has a positive affect on population, and unemployment rate – negative. People will choose to move to a place with higher wages (or because of higher wages), and bigger variety of available jobs (low unemployment). To compare population growth of Virginia and US Graph 3 shows Population Growth rate for US and Virginia Graph 3 US and Virginia Population Growth Rate 1975-1997 According to Graph 3 Virginia Population Growth rate mostly exceeds that of the US through the period from 1975 to 1997.
And it is significantly higher during period of time 1984-1991 and is slightly higher in 1997 Employment Employment is an important economic indicator. It shows the number of people that are engaged in production of regional output, people that are receiving income and paying taxes to the government. The Employment equation is in a form of labor demand relationship, where labor demanded is a function of regional output. Employment is population of a region that encouraged in production or creation of regional output. This means that the number of jobs available (employment) depends on the region output.
Growth State Product is taken as an estimate for total output of Virginia. So GSP determines demand for number of jobs (employment). Employment of the region also depends on the wage rate of the region and how it stands comparing with national rate. The high wage and salary will attract people (both from inside and outside the region) to take a job. If we take employment as an estimate of labor force than it should depend on population of the region, because labor force is a population of a certain age. Vaempl = 1980348.6+5.59 VaGSP + 35.01 VaW&S (25.01) (1.98) (1.43) R=0.98, F=83612.36 When including population in this regression it showed a positive relation …