Geoscience Reference
In-Depth Information
workers to produce $0.790 billion of supporting goods and services. In this case, the
implied output multiplier was 1.79, while the implied employment multiplier was 4.96.
It should be pointed out that alternative specifications of regional models give
rise to the possibility that the results of impact analysis as well as our observations
about how a regional economy behaves depend, perhaps not insignificantly, on the
choice of models. For example, at the time that the simulations reported in Table
8.4
were run with WPSM, multiplier estimates were also made with an economic base
model and an input-output model of the state economy. In 1982, the economic base
model indicated that the employment multiplier for aircraft—as well as for all other
basic industries—was 3.11. The input-output model estimate was 2.42. In both
cases, the multipliers were smaller than the 3.88 estimate from WPSM.
The interindustry econometric model yields higher multipliers than the input-
output model principally because of its greater degree of closure. Whereas the
so-called Type II input-output multipliers do not capture the effects of induced
investment or state and local government spending, WPSM recognizes that regional
economic activity, as measured by changes in population, per capita income, and
unemployment, does have an impact on such things as housing construction and
public education. A simulation with WPSM shows that, when the links to the
investment sector (primarily construction) and state and local government are
severed (opened), the aircraft employment multiplier in 1982 drops to 2.14, much
closer to the input-output estimate of 2.42. Neglecting the response of construction
and state and local government in economic impacts, as does the Type II input-
output model, is tantamount to writing off one-sixth of the economy.
8.5
Mobility and Equilibrium
The Washington Projection and Simulation Model is a demand-oriented model in
the tradition of economic base models. Implicit in the theory is the presumption that
the supply of resources, labor, capital, and other inputs to production can adjust to
any level of demand without an adverse effect on production costs. This does not
imply that WPSM is devoid of supply-side considerations. These are most notable
in the labor force submodel, which effectively depicts the drawn out adjustment of
labor supply to a rise or decline in regional economic activity.
Nevertheless, WPSM assumes that in the long run there are no supply constraints
on growth and that growth causes no perceptible loss of regional competitive
advantage. There are two reasons why the model does not attempt to portray
regional production costs and comparative advantage. As a practical matter,
regional data are insufficient—in terms of type, quantity, and quality—to ade-
quately support testable models of regional production functions and comparative
advantage.
More importantly, however, with the exception of natural resources (e.g., agri-
cultural land, timber, and fish), the assumption of perfectly mobile factors of
production in the long run seems quite reasonable for a small and open economy,
