The Labor Market Research Program:
Exploring Employment and Public Policy
Over the past two decades, economists and systems
analysts at the Institute have worked together to develop and
apply econometric and simulation models for forecasting changes
in the economy and estimating the impact of alternative public
policies. In the early 1970s, they began innovating with small-area
forecasting. They developed models for labor markets on the regional,
state, and county level. This specialization has made the Labor
Market Research Program one of a very small number of research
teams nationally able to project labor market information for
areas smaller than a state.
Recent activities of the Labor Market Research Program
can be grouped into two broad areas:
Assessing the Impacts of Public Policies.
In one facet of the Institute's labor market research, econometric
models are used for impact and policy analysis, that is, to answer
"what if" questions. For example, in "The Economic
Impact of Progress toward a Tobacco-Free Society," a joint
project with the School of Public Health, the objective is to
determine whether there are more economic benefits from the presence
or absence of tobacco product sales. The study uses a computer
model to simulate the economy of each of the major regions in
the United States with tobacco expenditures eliminated or reduced
and the equivalent spending redistributed to other goods and services
according to consumers' normal spending patterns. The results
are compared with baseline forecasts of the economy.
Initial findings concerning the impacts on a state that does not produce
tobacco were reported in the Journal of the American Medical
Association.
The Labor Market Research Program also has a long-term
project with the State of Michigan, using forecasting and simulation
models to assess state-level policy decisions. The primary goal
of this project is to provide the state with information and analyses
that will assist in the development and dissemination of strategies
for selected economic development activities. Applications have
been in key areas of concern for the state such as military base
and plant closings, business location decisions, and tax policy.
Forecasting for Economic Analysis and Planning.
Small-area forecasting has become increasingly important for
state and local government agencies. Recently, the Labor Market
Research Program was asked by the Michigan Department of Transportation
to provide forecasts of employment, income, and population for
each of the state's eighty-three counties, in compliance with
a federal government mandate requiring such information from state
governments. Since it has been made public that the state has
these forecasts available, there has also been a growing demand
for them from local government planners.
The Labor Market Research Program has also developed
specialized econometric models for generating more detailed county-level
forecasts. One prominent example is the economic outlook for
Oakland County, which has been generated every year since 1985
at the request of the county's economic development division.
The Institute's labor market researchers have also developed
models to generate other county-level forecasts.
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