Geoscience Reference
In-Depth Information
Fig. 16.5 LA County employment, working age population, employment rate and nominal and
real wages (% deviation from baseline)
depresses the capital rental price, and with it, the rate of return. As is clear from
Fig. 16.4 , it is the decline in willingness to pay, via its effects on the terms of trade
and ultimately the rate of return on capital, which has the largest impact on 2013
investment, reducing it by approximately 0.37 % relative to baseline.
BI is the third-largest contributor to the 2013 investment deviation (Fig. 16.4 ).
As discussed in Sect. 16.4.1 , BI is modeled as deterioration in input-using effi-
ciency in industries in 90071. This causes the marginal physical product of capital
to fall relative to baseline. Hence, for a given level of capital, the rate of return also
falls relative to baseline. This accounts for BI's
0.06 % contribution to the 2013
investment deviation (Fig. 16.4 ).
Figure 16.5 reports five labor market variables. Outcomes for these variables are
presented jointly to facilitate our explanation of the dynamic relationships between
each. We begin with the 2013 outcome for the real wage and employment. Recall
from Sect. 16.3.1 that nominal wages are modeled as sticky in the short-run. This
causes the initial negative deviation in the terms of trade (Fig. 16.3 ) to generate a
positive deviation in the real wage (Fig. 16.5 ). It is this initial rise in the real wage
that accounts for much of the initial negative deviation in employment. This is
confirmed by Fig. 16.6 which shows that the reduction in willingness to pay (via the
terms of trade and real wage paths) makes the largest contribution to the 2013
employment deviation.
There is a small negative deviation in population in 2013 (Fig. 16.5 ). In the first
year, the only influence on the size of the working age population is event-related
fatalities. This is clear in our population decomposition (Fig. 16.7 ), in which deaths
Search WWH ::




Custom Search