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Who Benefits from Job Creation at County Level? An Analysis of Leakage and Spillover of New Employment Opportunities in Virginia

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Abstract

Using an econometric model system built on county-level labor market data, this study allocates new employment in Virginia from 1990 to 2000 into: commuters, residents, and new entrants to the labor force (including immigrants). The study finds significant leakage of new employment opportunities in Virginia. Fifty-two percent of new jobs created in the 1990s in a locality were taken by outside commuters. However, Virginia's localities also benefit from spillover benefits from job creation elsewhere. Economists need to account for employment leakage and spillover to accurately evaluate the fiscal impacts of potential economic development projects.

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Notes

  1. Those are two of the widely used economic impact analysis tools in industry.

  2. In Virginia, cities are independent from counties, and cities and counties are equivalent jurisdictions. In this paper, for the sake of brevity, “counties” include independent cities.

  3. In Virginia, 2005 fiscal year ran from July 1, 2004 to June 30, 2005.

  4. The job allocation analyzed in this paper is the final allocation, not the initial allocation. For example, it can be the case that all jobs in a new company are taken by current residents working in the county. However, if they leave current companies for the new company, their old employers need someone to fill those vacancies. And eventually, those may be filled by commuters or immigrants.

  5. In Virginia, for the 2005 fiscal year, an average of 10 percent of local government revenues come from user fees charged for various government services. There are many types of fees, from charges for park and recreation services to vehicle registration fees. The job distribution by residential status may have different effects on those user fees. However, because they are so numerous and because the impact of any individual one is likely to be small, their analysis is omitted in this paper.

  6. In this paper, “immigrants” are any new residents to a city or county.

  7. Some new entrants, especially who come into the labor force through transition to working age, may be expected to be parts of existing households.

References

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Acknowledgements

The author wishes to thank two referees for their thoughtful suggestions. The views expressed in this paper are those of the author. They do not necessarily represent those of Chmura Economics & Analytics.

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*Xiaobing Shuai is a senior economist with Chmura Economics & Analytics. In this role, his duties include model building and forecasting regional and macroeconomic trends. His research also includes a wide range of issues in regional economic development and workforce development. He is a native of China and graduated from Fudan University in Shanghai. He pursued graduate study at the University of Wisconsin-Madison, where he obtained an M.A. in agricultural economics and a Ph.D. in economics. He serves on the board of directors of the Richmond Association for Business Economics and is an adjunct professor at the University of Richmond.

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Shuai, X. Who Benefits from Job Creation at County Level? An Analysis of Leakage and Spillover of New Employment Opportunities in Virginia. Bus Econ 45, 38–48 (2010). https://doi.org/10.1057/be.2009.38

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