Statistical Analysis of Regional Growth: Consistent Modeling of Employment, Population, Labor Force Participation, and Unemployment

Ledent, J. (1981). Statistical Analysis of Regional Growth: Consistent Modeling of Employment, Population, Labor Force Participation, and Unemployment. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-81-128

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Abstract

This paper focuses on the consistency problem that arises in statistical models of regional growth from the joint and simultaneous consideration of the following four labor market variables: employment, population, the labor force participation rate, and the unemployment rate. As these variables are linked by a definitional equation, one of them must, of necessity, be derived from the others. But which of the four variables should one choose as the nonprimary variable?

A test of the four possible alternatives in connection with a simple statistical model fitted to data for the rapidly growing metropolitan area of Tucson, Arizona, reveals that the preferable choice for the nonprimary variable is the labor force participation rate.

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