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Predicting State and Local Government Demand in Local Regions Based on Changes in Economic and Demographic
Conditions
Sherri LawrenceFrederick Treyz, Ph.D.
George Treyz, Ph.D.Nicolas Mata
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•Responds to Gross State Products as well as Population
•Need: Based on Population
•Resource: Based on Revenue (limited to GDP)
State and Local Government Demand
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State and Local Government Demand
Equations and Estimates The new state government demand equation has the following form:
Where, k = state t = time u = U.S. β = GDP elasticity of state government expenditures SG = State government expenditures in chained 2000$ RSG = local calibration factor for state government expenditures GDP = gross domestic product in chained 2000$ N = population
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The new local government demand equation has the following form:
Where,k = statet = timeu = U.S.γ = GDP elasticity of local government expendituresLG = Local government expenditures in chained 2000$RLG = local calibration factor for local government expenditures
GDP = gross domestic product in chained 2000$N = population
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kt NNLGNGDPNGDPRLG *)/(*)]//()/[(*
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Regression Equation Results
equation betastandard
error of beta t N R-square
SG 0.904 0.089 10.210 510 0.959
gamma
standard error of gamma t N R-square
LG 0.798 0.078 10.224 510 0.980
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Scaling Calibration Factors from State to County Level
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State Government Equation
Local Government Equation
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Previous Demand Equations: State
Where,l = local regiont = timeu = U.S.SG = State government demand in chained 2000$N = populationλSG = An estimate of the state government average demand per capita in the
last history year
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Previous Demand Equations: Local
Where,LG = Local government demand in chained 2000$λLG = An estimate of the local government average demand per capita in the
last history year Table 6 shows the percent change in the control forecast of a region in Georgia based on a model with the new equations for state and local government demand compared to a model with the old equations. For this region in Georgia, the GDP per capita has a growth rate of only about 60% of that in the nation by 2050, which in the new equation leads to the decline seen in the forecast of the state and local government employment when compared to the old equation.
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Change in Baseline Forecast as a Result of New Equations
Variable 2006 2010 2020 2030 2040 2050Total Emp (Thous) -0.14% -0.58% -1.21% -1.42% -1.68% -2.06%Total GRP (Bil Fixed 2000$) -0.11% -0.41% -0.80% -0.90% -1.05% -1.25%
Personal Income (Bil Nom $) -0.10% -0.44% -0.93% -1.05% -1.20% -1.46%PCE-Price Index (Fixed 2000$) -0.01% -0.04% -0.08% -0.06% -0.06% -0.08%Real Disp Pers Inc (Bil Fixed 2000$) -0.09% -0.39% -0.84% -0.97% -1.13% -1.36%Real Disp Pers Inc per Cap (Thous Fixed 2000$) -0.07% -0.20% -0.16% 0.01% 0.04% 0.06%Demand (Bil Fixed 2000$) -0.10% -0.40% -0.80% -0.92% -1.06% -1.27%Output (Bil Fixed 2000$) -0.06% -0.25% -0.47% -0.53% -0.62% -0.75%Population (Thous) -0.02% -0.18% -0.68% -0.98% -1.17% -1.42%Labor Force -0.03% -0.29% -0.90% -1.21% -1.45% -1.75%State Gov Emp (Thous) -0.95% -3.71% -7.48% -8.69% -10.04% -11.95%Local Gov Emp (Thous) -0.84% -3.31% -6.71% -7.81% -9.04% -10.78%
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Results of 1,000 Jobs Added to Professional and Technical Services Based on New
Equations Variable 2006 2010 2020 2030 2040 2050Total Emp (Thous) 0.08% 0.07% 0.06% 0.06% 0.06% 0.06%Total GRP (Bil Fixed 2000$) 0.07% 0.06% 0.06% 0.05% 0.05% 0.05%
Personal Income (Bil Nom $) 0.06% 0.07% 0.06% 0.06% 0.06% 0.06%PCE-Price Index (Fixed 2000$) 0.00% 0.01% 0.00% 0.00% 0.00% 0.00%Real Disp Pers Inc (Bil Fixed 2000$) 0.06% 0.06% 0.06% 0.05% 0.05% 0.06%Real Disp Pers Inc per Cap (Thous Fixed 2000$) 0.05% 0.03% 0.01% 0.01% 0.01% 0.01%Demand (Bil Fixed 2000$) 0.05% 0.05% 0.05% 0.05% 0.05% 0.05%Output (Bil Fixed 2000$) 0.06% 0.06% 0.05% 0.05% 0.05% 0.05%Population (Thous) 0.01% 0.03% 0.05% 0.05% 0.05% 0.05%Labor Force 0.02% 0.05% 0.05% 0.06% 0.05% 0.05%State Gov Emp (Thous) 0.06% 0.06% 0.05% 0.05% 0.05% 0.05%Local Gov Emp (Thous) 0.06% 0.06% 0.05% 0.05% 0.05% 0.05%
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