.. ship but was not significant. Two other variables are significant at 85% level of significance, are positively related to employment. Increase of output stimulates an increase of demand for labor (increase in employment) and increase in wages and salaries stimulates more people to take a job. Graph 4 shows the growth rates of Regional employment and National employment Graph 4 US and Virginia Employment Growth Rate 1975-1997 Employment in Virginia is growing at a higher rate than in the US for the time period form 1982 to 1988.
Over 20-year period of time regional and national employment growth rates are cointegrated. It is also useful to know what is the ratio of employment to a total population of the region. This data is plotted in a Graph 5 Graph 5 US and Virginia Employment Population Ratio 1975-1997 The employment to population ratio is higher for Virginia. It means that higher percentage of population is employed in Virginia than in US on average. Unemployment rate Unemployment rate of the region is an indicator of the labor market performance. An increase of unemployment rate causes a decrease of employment and regional output.
The regional unemployment rate depends on national unemployment rate. The correlation coefficient between national and regional unemployment rate is 0.98. Regional economy experiences the same recessions and expansions as national does. So we should expect a positive relationship between national and regional unemployment rate. If we take an employment as an estimation of number of jobs available in the region than employment can determine unemployment rate of the region.
With more jobs available the rate of unemployment should decrease. Population can also influence unemployment rate. If population is growing in faster rate that number of available jobs than unemployment rate would increase. VaUnplR = -4.161 + 0.55 UsUnplR + 0.000002 VaPop 0.000003 VaEmpl (-1.43) (5.08) (1.91) (-1.95) R=0.83 F=30.55 Compressing of US and VA Unemployment rate is shown in Graph 6 Graph 6 US and Virginia Unemployment rate 1975-1997 Through 20-year period Virginia unemployment rate lower than US unemployment rate. US and Virginia unemployment rates are moving together depending on economic situation in US.
Wage rate and personal Income Block Wages & Salary Wage and salary rates can estimate earnings of the region. Age and experience of regional workforce will influence wage and salary rate. So the average wage and salary rate can indicate the type and labor forth of the region. The change in regional wage will be a subject to most of the same determinants as change in market wages. Regional wages and salary rates are related with national rate. The correlation coefficient is 0.99, so it means that wage rate of region is very sensitive to the wages of the country as a whole.
An increase in the national wage rate would cause regional wage to go up because the change in regional and national rates are caused by the same factors like inflation or increase in output. Regional wage and salary rate depends on Growth State Product. Wages and salaries are part of the GSP as and they are included as a cost of production, so if GSP increases it means that there will be more money to distribute to employees. VaW&S = -554.48 + 0.944 UsW&S + 0.0089 VaGSP (-2.58) (30.94) (2.58) R=0.99 F=3744.6 US and Virginia wage and Salary rates are compared in a Graph 7 Graph 7 US and Virginia Wage and Salary Rate 1975-1997 The US Wage and Salary is higher than regional. Both variables increase with time but Virginia rate remains lower then US rate. This means that Virginias salaries and wages are lower than in US on average.
Income The income of the region is a important factor of regional development, income is the money that can be spent on goods and services and is determining the demand for regional output, and increase in personal income can stimulate growth of regional economy. Regional Income depends on employment of the region and regional wage and salary rate. Both these variable have a positive relationship with income. The more people are employed the more money population receives. The higher is wage and salary rate the population of a region is getting more money for their work.
VaInc = -67481.93 + 0.154 VaEmpl + 5.94 VaW&S (-3.89) (1.54) (7.02) R=0.99 F=1383.38 Growth rate of income US and Virginia is compared in Graph 8 Graph 8 US and Virginia Income Growth Rate 1975-1997 Income growth rate for Virginia and US are cointegrated. Until 1990 the Virginia Income growth rate was higher than that of the US. But after 1990 it is almost the same as the rest of country. Per Capita income is an estimate of income available for each person in Virginia or US on average. Graph 9 shows regional and national per capita income. Graph 9 US and Virginia Per Capita Income 1975-1997 Virginia Per Capita Income is higher than that of the US since 1983.
This shows that there is more income on average for each person in Virginia than in US. As it was maintained before Virginias wage and salary rate is lower than in US, but so does unemployment rate. The lower Unemployment rate stimulates high per capita income, even with low wage and salary rate. Graphic description of Virginia regional model is presented in Appendix B Analysis Virginia is a region of fast growing economic activities and development. Virginia offers a number of advantages for business.
The state is centrally located on the Eastern Seaboard Effective economic development depends on elements with which Virginia is richly endowed. Location is one of them. Over 50% of the total U.S. population is within 500 miles of Richmond, Virginia’s capital. As a measure of its economic stability, Virginia balanced its latest budget without raising taxes, one of only two states to do so according to Financial World magazine, and was recognized by that publication as the nation’s best managed state.
Development of the region runs on infrastructure, and in this category, Virginia boasts nearly 1,100 miles of highways, 3,300 miles of rail Roads, and Dulles International Airport. The daily confluence of goods and services across this network paints a portrait of economic development at its most sophisticated level. Nowhere is this more apparent than at Hampton Roads, the country’s largest natural deep-water port that in 1991 accounted for 73 million tons of foreign trade — a figure that is still growing. The education institutions are very developed in Virginia. Virginia has 84 institutions of higher learning. Twenty-three of these are community colleges on 34 sites offering training in the business discipline as well as advanced vocational training. In 1991, more than 2,600 students in Virginia’s colleges and universities earned degrees in the field of engineering — creating a talent pool essential to nation’s high-tech future. The overall performance of Virginia economic indicators is shown in Table 1 Table 1 Economic Indicator General state Period when higher than US indicator Output Growth rate Average 1980-1988 Per Capita Output Average 1984-1997 Population Growth Higher than average 1983-1997 Employment growth rate Average 1982-1988 Unemployment rate Low — Wage and salary rate Low — Income Growth rate Average 1980-1989 Per Capita Income Average 1982-1997 As can seen for Table 1 period form 1980-1990 can be characterized as a period of fast economic growth.
In this period economic indicators of Virginia were higher that in the US. After 1990 there is some decrease in economic development of the region. This decrease in economic activates could be explained by some specialization of state of Virginia. One out of five jobs in Virginia is a civilian government position. Though federal civilian employment has been in a steady decreasing since 1992, rising state and local government employment has offset these losses.
In 1997 and 1998, civilian government employment in Virginia will actually experience a net growth of about 1 percent, the report predicted Virginia’s economy depends heavily on its defense industries. Though period 1980-1990 the defense industry was in prosperity, a lot of money was invested during presidency of R. Raygan and period of Cold War. Since 1990 Virginia had experienced few rounds of defense cuts that influenced the economic situation of the region. But there are some efficient state conversion program is helping to prepare for coming defense spending cutbacks.
With its concentration on electronics and shipbuilding, Virginia has been spared the first round of defense. The Virginia plans to soften the blow of defense. The good example of this is Northern Virginia aria. It is the most developed part of Virginia. Companies in telecommunications; Internet applications; systems development, integration and implementation; and the chemical and biomedical industries have all either relocated or created offices in Northern Virginia. The area is also home to nonprofit agencies and, of course, government agencies.
Conclusion Economic situation of the region can differ from national depending on performance of regional economic indicators. The economic factors that can economic performance of the region that were presented in this paper are Regional Output, Population, Employment, Unemployment rate, Wage and Salary rate, and Personal Income. These economic factors are the main variables of regional economic model that presented in this paper. Appendix B is the graphic interpretation of the mode. It gives the idea of relationships that exists in among variables.
One of the most impotent economic indicators of the model is output of the region. It determines the demand for labor in the region and it is the main source of income for population. So the high regional output generally implies the high economic performance of the region. In order to make conclusions about the level of performance of the region it is useful to compare it with national economic performance. In this paper Virginia state economic indicator were compared to US.
The Virginia performance could be caricaturized as an average relative to US. Virginias advantage is that Unemployment in this state is lower than in US. Wage and Salary rates is slightly lower than in US, but Per capita Income still increases average Per capita Income of US. For some period of time (1980-1990) Virginia Economy was booming: all economic indicators showed better performance of the region. This could be explained by increase in government expenditures on defense industry (the significant of economy of Virginia) in 1980s. The decrease in economic activity of Virginia began with defense spending cutbacks in 90s.
But this situation is changing now because of new arias with developing high technology industries and business sectors like Northern Virginia. Bibliography 1. John R. Fiske, James C. Lamb, Mark F. Morss: Practical economic forecasting for small regions.
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Siegel, Thomas G. Johnson, Jeffrey Alwang: Regional economics and diversification. 4. Bureau of Census: http://www.census.gov 5. Bureau of Economic Analysis: http://www.bea.doc.gov 6. Bureau of labor Statistics: http://www.bls.gov 7. FedStats: http://www.fedstats.gov 8.
University of Virginia Social Science Data Center: http://fisher.lib.virginia.edu/ 9. Virginia (special advertising supplement) Forbes, Dec 7 1992 10. Kim Fulcher Linkins: Virginia’s New Dominion: Northern Virginia’s Silicon Dominion is home to high-tech firms that offer work in every facet of IT. Computerworld, August 16, 1999 11. Richard Meyer: Of swords and plowshares: how Virginia plans to soften the blow of defense cutbacks on its economy. Financial World, June 8, 1993.