A Generalized Specification of Regional Labor Markets

Abstract

In recent years, regional models have advanced significantly beyond a statistical reallocation of national behavior. Differences in regional behavior are now explained by more than differences in the income responsiveness of local industries to national conditions and the regional composition of industries. The relative competitiveness of local industries in national markets is also being used in model construction.¹ Differential impacts of national policy variables, which have long been utilized, are being augmented by the impacts of many local policy variables.² Some concepts discussed in the literature on regional economics, such as economic base analysis,³ the emphasis on interregional trade,⁴ and interregional factor flows, especially population migration,⁵ have found their way into specifications of regional econometric models. However, an underlying behavioral model that explains why regional growth rates differ and why some regional business cycles differ from national fluctuations, still seems to be missing from regional econometric models.