Economic Growth in Washington: An Examination of Labor Market and Fiscal Response

This study develops a regional econometric model to extend and complement standard local economic impact analysis for Washington counties. Based on a static macroeconomic model, we derive labor supply equations and fiscal equations. The resulting empirical model is based on a cross- sectional econometric analysis of all Washington counties. The use of the estimated econometric model is illustrated with 5 percent job growth scenario that is simulated for each Washington county. For some counties, growth scenario actually results in an increase in the number of unemployed. This occurs because most of the new jobs are taken by either in-commuters or new residents who bring with them additional entrants into the local labor market some of whom become unemployed.