The economic situation differs from country to country, caused by difference inpopulation, geography, monetary system, political situation and a lot of otherfactors. But even within one country there are always a number of regions thatdiffer from one another by their economic performance. This situation isespecially true for big countries like US. If the regions are too broadlydefined, the economic diversity would be lost. If the regions are too narrowlydefined, they are not likely to have any viability as economic entities, andthis circumstance will increase the problem of developing good regional economicdata pertinent to the individual regions. Economic indicators like income,employment and population may differ in the rural and urban areas of a singleregion, but the growth of the region still depends on the economic performanceof the region as a whole, and especially the towns and cities. An input-outputmodel is very useful of measuring regional economic activity.
Such a modeleffectively determines the impact of one economic variable on another can beused to analyze expected growth. The measure of regional economic indicators andcomparing them to national could produce a good estimate of economic performanceof a region. The regional economic model in case of the region within US couldbe compared with the model of a small country. And national model could be seenas an aggregation of many interrelated regional models. This paper includes anestimation of the regional economic model The model is an attempt to estimatepossible relationship within economic indicators. This paper also presents ananalysis of regional economic indicators and national economic indicators inorder to compare economic performance of the region and national economy as awhole. This model use annual national and state level data to produce regionalestimates of income, employment, wages, population, labor force and theunemployment rate as a economic indicators for Virginia state as a region.
Previous studies Regional scientists have long attempted to develop meaningfuldefinitions and measures of economic diversity and diversification, and toestablish functional relationships between diversity, diversification, andeconomic performance. The Regional economic models where (were) created toanswer questions like “What is the relationship between a region’s changingeconomic structure and performance. Recent econometric models of regions werestressing macroeconomic relationship as a main idea of structuring of the model.A Number of models have been constructed for states and even smaller areas inorder to find an effective forecasting tool linking the regional economicforecasting to the national economic forecast. Regional models were constructedas satellites to national models. Economic base theory views regional economicgrowth as being driven by exogenous final demands, notably exports. Input-outputmodels are extensions of the economic base model, whereby intersectionaleconomic relationships are explicitly considered Because of the underlyingassumption that the regional economy is driven by exogenous final demands. Theidea of regional economic model that is (instead of “that is” say”used”) in this paper is based on two studies that present economicmodels of regions in US.
One study, reports on a regional economic modelingapproach used by East Kentucky Power Cooperative, Inc. (EKPC), a rural electriccooperative that serves 280,000 residential customers and 15,000 commercialcustomers in east-central Kentucky. These models use quarterly, county-leveldata to produce regional forecasts of income, employment, wages, population,labor force and the unemployment rate (1). Another study describes an economicmodel for state of Mississippi (2). Both studies indicated economic variables inregional output, labor, and income and wages blocks and estimated regressions onorder(must be “in order”) to fine (must be “to find”)direction of dependence among variables. Both studies provide graphicalinterpretation of their models.
Data Regional models often use data, which isallocated to the region, state or national level on the basis of employment,income or some other variable actually measured at the regional level. Such datamay serve the needs of particular model specifications and produce forecasts ofvariables. In this study, Virginia regional model uses a variety of national andregional data.
The variables are summarized in (Appendix A). All variables weretaken from University of Virginia Social Science Data Center (8). Gross domesticproduct (GDP), the featured measure of U.S. output, is the market value of thegoods 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