Applied Regional

Research in REAL

Geoffrey J.D. Hewings

Director,Regional Economics Applications Laboratory

217.333.4740 (244.9339 fax)

hewings@illinois.edu

R E A L

Celebrating 25 years of quality research 1989-2014

Preliminary findingsWhy Per Capita Income declining?

2

Preliminary findings

• Migration patterns US-Chicago relatively stable

but continued net loss

• As Partridge et al. (2010) have shown, volume

migration in US has decreased since 2002

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Preliminary findings• Chicago MSA net loss $23 billion dollars in terms of

family income in 16 years. This means $1.45 billion

income per year.

4

Preliminary findings

• Inflow from RUS has lower than those out-

migrating:

• Selection bias? Yes.

• People who move longer distance (both move in

and move out) are earning more than people

who are not moving or moving in short distance.

• Does Chicago make people more productive over

time?

• Possible stage of life selection bias – are in-

migrants younger (recent college graduates) and

out-migrants more experienced?

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Dynamics of change

• Stylized facts

• Every year,

• 86-88% people stay in the same house as last

year

• Every year, around 7-9% people change their

household locations within a region

• 5% move in or out

• Region loses 0.3-0.6% people through net

outflows 26

ACS 2005-2009: Analysis by

Education

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Education levels and FlowsHigh College

School Graduates

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Age and Flows

Dominate

net inflow

Start of

Net

outflow

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Modeling Framework

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Progress• Current Progress

• Disaggregated households by age, income

• Generated consumption profiles

• Migration separated into in- and out-

• Developed industry*occupation matrices

• Forecasts 2010-2040

• Use micro-simulation to map age, education,

occupation and income characteristics onto

• Stayers

• In-migrants

• Out-migrants31

Future Work

• Micro-simulation will be used to model location

choices of

• In-migrants

• Existing residents changing houses

• This will provide micro-spatial basis of population

and employment change that will be integrated with

macro model to explore interaction of macro

changes with growth in 300 communities within

Chicago region

• Preliminary analysis suggests problems

accommodating population increases 32

Proposed Macro-to-micro Link

Macro………………………………… Community…..Micro-simulation

(LEAM)

30 m square cells

Employment (E) Income (Y)

Population (P)

Final Demand(F)Output

National Economy

Land Use

Intra-regional-levelEmployment

Intra-regional-levelPopulation

Expected EmploymentGrowth

Dynamic IO

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Comparison of Constrained and

Unconstrained Population growth

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Comparison of Constrained and

Unconstrained Employment growth

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Polarization vs. Neo-Classical Growth Theory:

Can the Convergence Model be the Judge?

Chenxi Yu (PhD student Urban & Regional Planning)

• How could the business cycle affect the convergence rate?

• Assumption: Different income elasticities of product demand

for wealthier regions and for poorer regions in Good and Bad

economy.

When the economy

is booming, the

gap between the

wealthier and the

poorer regions is

increasing.44

Preliminary result with OLS

estimation

• Convergence rate is the highest during energy crisis

period

• The recession-recovery periods are higher than

normal growth periods

• Convergence rate is declining over time

9.84%

6.17%

1.32%3.26%

-0.09% 0.65%

1973-1980 1980-1984 1984-1990 1990-1994 1994-2001 2001-2006

β-convergence rate

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Endogenous Growth of Ageing Economy:

Evidence and Policy MeasuresTae-Jeong Kim (Ph.D. Economics)

• What is the effect of ageing population on regional

economy? What kind of public policy should be

implemented to mitigate the negative effects of ageing

phenomenon?

• This paper employs two-sector economic model which

was mainly explored by Uzawa (1965) and Lucas

(1988) within the overlapping generation (OLG)

framework to reflect the dynamic optimization process

and its consequences of each generations. 49

Results

• Population ageing will lower the economic growth of Illinois

• However, investment in human capital offsets significantly the negative effects of ageing population.

• This paper also measures the effectiveness of government

policies for mitigating the negative effects of ageing

phenomenon: the tax policy which encourages for individuals to

invest more time in education works best in the long-run.

Growth of Per-capita Output

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2001 2006 2011 2016 2021 2026 2031 2036 2041 2046

One-sector model

Two-sector model

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Economic Impact Analysis of 1993 and 2008 Flood in

the State of IllinoisJun Wan (PhD urban & regional planning)

· Analysis of Income Per Capita by County

· Migration Analysis by County

In-Migration; Out-Migration, Net-Migration

· Employment Analysis by County

· A stochastic, time-series ARIMA model

Analyze the dynamics of changes, variation and

interpretations in the flood-affected counties’

economy through time series data

Analysis of Income per Capita by County After the Hit of

1993 Great Midwestern Flood in Illinois

· Regional, state and local

economies were resilient to

the flood

· Short-run: negative

economic impacts on

personal income

·Long-run: local economies

might bounce back and

sometimes could even do

better than before

Yearly Percentage Change in Per Capita Income

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

1992 1993 1994 1995 1996 1997

Year

% C

han

ge

Illinois State Alexander Union52

ARIMA Analysis of Net-migration Rates in Illinois

Counties after 1993 Great Midwestern Flood

County ARIMA AR(1) AR(2) MA(1) MA(2) Intercept Short-Run Long-Run

Alexander ARIMA(1,0,0) -0.682 -- -- -- -0.083 -1.290 0.537

Brown ARIMA(1,0,0) -0.773 -- -- -- 0.088 -0.219 -0.531

Calhoun ARIMA(0,0,1) -- -- -1.000 -- 0.074 -5.777 1.597

Cass ARIMA(1,0,0) -0.502 -- -- -- -0.104 1.262 -0.232

Greene ARIMA(1,0,0) -0.556 -- -- -- -0.029 0.820 -0.155

Jackson ARIMA(1,0,0) -0.674 -- -- -- -0.067 -0.886 0.132

Jersey ARIMA(0,0,0) -- -- -- -- 0.003 0.606 0.197

Madison ARIMA(0,0,1) -- -- -1.000 -- 0.059 -2.855 0.778

Monroe ARIMA(0,0,1) -- -- -1.000 -- 0.044 0.266 -0.035

Morgan ARIMA(1,0,0) -0.415 -- -- -- -0.023 -0.095 0.073

Pike ARIMA(0,0,2) -- -- -1.918 1.000 -0.092 -0.066 0.127

Randolph ARIMA(1,0,0) -0.763 -- -- -- 0.214 2.650 -1.175

St. Clair ARIMA(2,0,0) -0.786 -0.419 -- -- 0.082 -4.266 0.832

Scott ARIMA(0,0,1) -- -- -- -1.000 -0.005 3.377 -1.101

Union ARIMA(1,0,0) -0.298 -- -- -- -0.093 -1.720 0.311

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ARIMA Analysis of Employment in Illinois Counties

after 2008 Flood

Flood EffectsEmployment

May 2008Percentage Decrease %

Winnebago -498.8214 137443 0.362929651

Lake -1296.534 339376 0.382034675

Whiteside -48.5357 21224 0.228683095

Rock Island -274.3571 80427 0.341125617

Mercer -5.4286 3197 0.16980294

Henderson -14.886 1126 1.322024867

Hancock -26.2168 5016 0.522663477

Adams -210.7143 34480 0.61112036

Jersey -85.7015 5190 1.65128131

Calhoun 1.1071 893 -0.123975364

Douglas -24.7143 7294 0.338830546

Edgar -33.5714 6700 0.501065672

Coles 150.1429 24758 -0.606441958

Cumberland -24.5357 2371 1.034824968

Jasper -36.0376 2447 1.472725787

Clark -39.7857 4966 0.801161901

Crawford 4.2289 7314 -0.057819251

Lawrence -46.2512 4775 0.968611518

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ARIMA Analysis of Migration Rates and Employment in

Illinois Counties after 1993 Flood

· Short-run and Long-run Impact of Flood on Migration Rates

and Employment are Analyzed by ARIMA model

· Most local displacement or migration due to flood tends to be

temporary, but may become permanent, particularly if the

disaster permanently alters or destroys a local economic base.

· The flood is likely to force people from their homes in the

small heavily damaged counties. In the long run, there were

either no effects or possibly positive effects on population.

· Counties with small economic sizes tend to suffer a higher

level of negative flood effects than counties with large

economic sizes which could recover easily with abundant

capital and labor sources. 55

USA

Final consumption

GHG emissions embodied in international trade

(Intercountry-interindustry framework)Norihiko Yamano (OECD and PhD student Urban & Regional Planning)

Australia

(Coal)

China

(Plastic products)

UK

Final consumption

Japan

(Steel)

(Machinery) Monetary

Trade, CO2

Import contents

of exports

Emissions from

Transport sect.

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Harmonized I-O Database

Cyprus, Romania

Non-OECD EU

Czech Rep., Slovak

Rep., Poland,

Hungary

Switzerland, Norway

EU15 Australia, Canada, Mexico,

New Zealand, Turkey

Brazil, India, Russia Argentina, Israel, S.Africa

Japan, Korea, USA China, Indonesia, Singapore,

Chinese Taipei

Rest of World

Malaysia, Philippines, Thailand

Asian-US 10: JETRO-IDE

Target countries in this study

EU25: Eurostat

Iceland

OECD countries 57

Carbon footprint: direct emissions factor vs carbon

embodied in final goods

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Food products (ISIC 15)

Embodied Direct1.4

-0.1

0.1

0.3

0.5

0.7

0.9

1.1

1.3

1.5

Machinery & metal products (ISIC28-33)

Embodied Direct

2.3

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Summary• Other projects:

• Supply chain impacts of Minority SBEs

• Alternative uses of coal to generate energy (clean coal, gasification, coal to oil)

• Empirical challenges to the NEG (using Chinese interregional flow data)

• Interstate trade

• Economic interdependence in a metro region

• Melting the iceberg – transport margins in CGE models

• Comparison of Walrasian and Marshallian CGE models on same data base

• Continuous time econometric-IO modeling

• Evaluation of urban revitalization in Turkey (Deniz Ay)

• Labor force dynamics in Guatemala (Krugman-Blanchflower/Oswald-Harris/Todaro-Mortenson/Pissarides)

• Matching indicators to develop new housing price index (Esteban Lopez)

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R E A L

Regional Economics Applications

Laboratory

University of Illinois

www.real.illinois.edu

25 years of Quality Research 1989-201460