W H .^^^h. ^^^^k ^M * USDA EPA United States Department of Agriculture Economic Statistics and Cooperative Service Washington DC 20250 United States Environmental Protection Agency Office of Environmental Engineering and Technology Washington DC 20460 EPA-600/7-80-146 August 1980 Research and Development An Introduction to the COALTOWN Impact Assessment Model Interagency Energy/Environment R&D Program Report ------- EPA 600/7-80-146 August 1980 AN INTRODUCTION TO THE COALTOWN IMPACT ASSESSMENT MODEL by Lloyd D. Bender The Economics and Statistics Service Montana State University Bozeman, MT 59717 George S. Temple Department of Agricultural and Applied Economics University of Minnesota St. Paul, MN 55101 Larry C. Parcels Department of Agricultural Economics and Economics Montana State University Bozeman, MT 59717 EPA IAG Number 79-D-X-0519-EG Project Officer Paul Schwengels This study was conducted by The Economics and Statistics Service The United States Department of Agriculture 500 12th St. SW Washington, D.C. 20250 Office of Environmental Engineering and Technology Office of Research and Development U.S. Environmental Protection Agency 401 M St. SW Washington, D.C. 20460 ------- DISCLAIMER The conclusions and views expressed are those of the authors alone and do not represent policy of The Economics and Statistics Service or the U.S. Environmental Protection Agency. ii ------- FOREWORD Coal mining and conversion in the coal-rich Northern Plains create social and economic change in rural areas of the region. Coal development is expected to accelerate due to the low sulfur content of the reserves and their relative ease of mining as utilities throughout the Nation turn to coal for an alternative source of energy. Renewed Federal leasing of these vast reserves and the application of new coal conversion technologies could add greatly to the impacts in the few rural parts of the region with the easiest access and greatest reserves. This report summarizes the first phase of a research plan designed to improve the accuracy of local economic impact estimates that are due to coal development in the Northern Plains. Very little attention has been directed to problems of estimating rapid employment and population changes in rural localities. Procedures designed for urban areas and large regions are in- applicable to small and isolated rural economies. The accuracy of impact analyses for rural areas has suffered. Future research will be directed to estimating more precisely the timing of adjustments and their spatial distribution — elements which are especially critical to impact assessments but which have received no research attention. That research will relate local economic changes in the past to changes in current periods, and will be directed to the general case of rapid rural change. It's successful application will be useful to evaluate numerous types of rapid change in many different rural places — a generic application not confined to the-Northern Great Plains. This research has been conducted with_ the cooperation of Montana State University, North Dakota State University, and the University of Minnesota through special agreements with the Economics and Statistics Service of the U.S. Department of Agriculture. Numerous other technical and lay reports relating to coal development and community impacts are available from this research effort. Paul Schwengels, Project Officer Office of Environmental Engineering and Technology Office of Research and Development U.S. Environmental Protection Agency Kenneth L. Deavers, Director Economic Development Division Economics and Statistics Service U.S. Department of Agriculture iii ------- EXECUTIVE SUMMARY COALTOWN simulates future employment, population, wage levels, migration, State and local tax receipts, intergovernmental transfers, and local government expenditures for counties in Montana, Wyoming, and North Dakota. The model is designed to assess impacts by comparison of results when one or more energy projects are included with baseline results. The model has three parts — socioeconomic, State and local government revenues, and local government expenditures. The structure of COALTOWN is dif- ferent from an economic base model although modified economic base concepts are used. Stochastic estimates of the major parameters of the model are used. A multiplier is not calculated by the model. Rather, predictions of 'ancillary' employment are made by use of equations. The model is dynamic in that it uses lagged variables, and because interrelationships among variables in the equa- tions of the model produce reverberations in years following an initial change. Although the coefficients in the equations of the model are representative of Northern Plains counties, the application to a specific county yields results which will be different from that of counties with other background conditions. The model is designed for near term prediction and assessment purposes. Principal uses are: 1. Predict absolute levels of socioeconomic aggregates for planning purposes. 2. Assess impacts on socioeconomic aggregates for purposes of evalua- tion of a facility. 3. Test the sensitivity of socioeconomic and fiscal aggregates to key policy measures. The predictive accuracy of the stochastic estimating equations in the model is extremely good. The accuracy of results of the full model deteriorates for successive years included in the analysis, a characteristic common to all simu- lation models. The model has limitations and shortcomings. First, it estimates only aggregate parameters because predictive accuracy declines with the level of disaggregation. Second, accurate results are very much dependent on the accu- racy of data supplied by users as inputs. Third, no capability now exists to estimate the distribution of new people among counties, and local governments within a county. Finally, the level of aggregation to some extent prevents an analysis of the distribution of impacts among residents in the area. The COALTOWN impact assessment model is a prototype research model in its current form. Each part of it can be used separately. The model requires main- tenance each year in order to be up-to-date, and the model parameters should be re-estimated periodically. The general structure of the COALTOWN model appears to be a useful approach to impact assessments, and is a departure from other models used for that purpose. iv ------- CONTENTS Foreword iii Executive Summary iv Figures vi Tables vi Introduction 1 General Characteristics of the COALTOWN Model 1 The Socioeconomic Component . 1 Ancillary Employment 3 Employment Participation by Residents 4 Migration and Wages 4 Dynamic Interactions 5 State and Local Revenues 6 Local Government Expenditures 7 Principal Uses of the COALTOWN Model 7 Information Supplied by the User 8 Data Generated by the Model 8 The Predictive Accuracy of Estimating Procedures 10 Limitations of the Model 12 References 14 Appendices A. Data Supplied to COALTOWN 16 B. Characteristics of Data Used in Estimating COALTOWN 19 C. Stochastic Estimation of COALTOWN Parameters 21 D. Predictive Accuracy of Estimates for Selected Counties ... 25 E. The System of Equations 28 ------- FIGURES Number Page 1 General structure of the socioeconomic segment of COALTOWN .... 2 2 General structure of the revenue segment of COALTOWN 6 3 Example of summary output of COALTOWN, example county - Montana Northern Great Plains scenarios - with new mines 9 4 Example of detailed revenue of COALTOWN, example county - Wyoming Northern Great Plains scenarios - without new mines 10 TABLES Number Page 1 Equation estimates and observed values, population 1970-77, seven Northern Plains counties with coal mining and/or conversion 11 Appendix C 1 Estimating equation for ancillary employment in Northern Great Plains counties 22 2 Estimating equation for employment ratio in the Northern Great Plains counties 23 3 Estimating equation for net migration in Northern Great Plains counties 24 Appendix D 4 Equation estimates and observed values, ancillary employment, non-farm proprietors and employment per 100 population 1970-77, seven Northern Plains counties with coal mining and/or conversion 26 5 Simulated predictions of employment-population ratio and population, and percent deviation from observed 1971-74, seven Northern Plains counties with coal mining and/or conversion 27 vi ------- INTRODUCTION Recent increases in coal mining and projections of future development and utilization of Northern Plains coal reserves have created concern that major social and economic changes will follow (2). JY Federal, State and local leaders need assessments of the effects of coal development on local economies and governments. Impact assessments aid in the evaluations of public and private policies and the impacts of specific projects, and can guide local and regional planning. The COALTOWN model simulates future employment, population, wage levels, migration, State and local tax receipts, intergovernmental revenue transfers, and local expenditures for counties in the Northern Plains States of Montana, Wyoming, and North Dakota. COALTOWN enables an analyst to estimate and com- pare conditions "with" and "without" a project over a period of time. The project's impact is the difference between each of the forecasted indicators "with" and "without" the project. COALTOWN is designed to reproduce conditions existing in the current economy and to modify those relationships as growth and change occur (11). Dynamics are built into the model's statistically estimated equations. The reverberations following initiation of a project and the continuing shocks within the system can be traced over a period of years. GENERAL CHARACTERISTICS OF THE COALTOWN MODEL COALTOWN estimates three sets of impacts — aggregate socioeconomic indicators, governmental revenues, and governmental expenditures. Results from each can be used separately or in combination with the others for assess- ment purposes. Each has its own methodology, strengths, and weaknesses. The simulation begins with data supplied by the user for an initial year. Data for succeeding years are supplied by the model itself as well as the user. The number of years to be included is determined by the user, but the model is most appropriate for near-term analyses. " / The Socioeconomic Component Estimates of employment, jobs per resident, migration, population, and wages of ancillary employees are generated by the socioeconomic equations of COALTOWN. The definitions, methods of estimating and relationships among the elements of the model are quite different from that of an economic base model even though the rationale is similar. \J Underscored numbers in parentheses refer to references listed at the end of this report. ------- Primary employment, past economic events in the local economy, and the events in and the characteristics of the economies in adjacent areas all drive the socioeconomic part of the model (Figure 1). The model is dynamic in more than one respect due to this. A local economy may change even though primary employment may not change. In addition, a change in primary employment can alter local economic conditions in future years (10, 1). One year prior to the year being estimated Year being estimated Key: f Primary V. employment Primary employment Adjacent primary employment Adjacent primary employment Ancillary employment Ancillary employment Total employment change Wage rates and town size Employment participation rates Employment participation rate Population level Population Net migration Net migration Wage rates Local government spending exogenous variable endogenous variable estimated relationship Figure 1 — General structure of the socioeconomic segment of COALTOWN ^wsssgte^1^*- ------- Primary employment is composed of all energy-related construction and operation employment plus employment in agriculture, manufacturing, heavy construction and Federal establishments. These industries by assumption ex- port their production to people outside the county. 2j The user must supply, for use in the model, the number of workers in energy activities and in other primary industries for each year simulated. What has happened previously in a local economy establishes a foundation upon which future changes are built. The levels of primary employment, wages, employment participation and migra- tion in prior years are a part of that economic foundation which influences current and future changes. The size of the largest town in a county, the distance to a regional trade center, the size of the dominant competing cen- tral place in an adjacent county, and the amount of primary employment in adjacent areas help to determine ancillary employment in a county. In turn, these also affect the future place of a county in the central place hierarchy. The socioeconomic part of COALTOWN contains three essential equations which are used to estimate ancillary employment, the ratio of employment to population, and migration and wages. A brief description of what factors affect each of these impact elements followed by an illustration of some of the dynamic behavior will serve to introduce the COALTOWN model. Ancillary Employment The number of ancillary jobs in the aggregate is estimated by the COAL- TOWN equations for each simulation year (10). An employment multiplier is not estimated directly. _3/ Estimation of ancillary employment in a forecasting equation rather than calculating a multiplier each year requires less data, allows the introduction of dynamic features, and allows the implied marginal multiplier to be different from the average and to be non-linear. Ancillary employees include workers in wholesale and retail trade, finance, insurance, real estate, personal and business services, State and local government, and the portions of the transportation and construction sectors which serve local people, kj Ancillary employment is estimated as a function of the amount of primary employment in the current and prior year, ancillary employment in the prior year, the wage level of the prior year, the characteristics of the county economy, and the spatial setting of the county economy. _5/ It is noteworthy that ancillary employment in a county is described as responding to a host of variables and not just primary employment. Ancillary employment may in- crease due to secular change in service production technology in the Nation 2J 'Primary' employment does not encompass all basic employment in a county as economic base theory would dictate. For instance, service activities pro- vided to people commuting from other counties is not included as 'primary' employment. j}/ The number of ancillary jobs in relation to the number of primary jobs is an implied multiplier, but its magnitude will not be the same as multipliers calculated with other definitions. _4/ Ancillary employment in the transportation and construction sectors are calculated using location quotients. _5/ The stochastic equation is in Appendix C, Appendix table 1. ------- or to increases in wages in a county (I). Furthermore, changes in prior years affect ancillary employment in succeeding years. The characteristics and spatial setting of a county which influence ancillary employment are the distance to a regional trade center, the size of the largest town in a county, and the activities in adjacent counties. For these reasons the number of ancillary workers in relation to primary workers varies from county to county, and through time. Employment Participation by Residents The demand for new workers in a county can be met by residents entering the labor force or by migration. The potential supply of local workers de- pends upon how much of the population is already employed, and how many would be attracted into the labor force if new jobs were available. An estimate of the ratio of employment to population is used to calculate new entrants of local residents into the labor force as labor demand increases. 6_/ The ratio of employment to population tends to increase and to remain high in tight labor markets characteristic of growing economies. To the extent that local people continue to enter the labor force, then the ratio of employment to population increases, migration is unnecessary, and population increases do not occur as employment expands. As the employment to population ratio reaches its upper limits, then migration occurs to satisfy demand for new labor. Once employment increases cease, the employment to population ratio slowly declines as migrants replace local residents in the labor force, and it continues to decline until the proportion of residents with jobs returns to a normal level. The number of jobs per person (the employment-population ratio) typically varies a great deal across counties and through time, but can be estimated quite accurately. The model has a special programmed option for specifying an employment to population ratio for inmigrants different from that which is estimated within the model for the resident population. The feature is extremely important during construction periods when a temporary labor force is brought to the site of a facility. Temporary construction workers often leave their families elsewhere, and a high ratio of employment to population is observed for them. The result is a much less severe impact on population than might otherwise be expected. Migration and Wages Migrants fill those jobs not taken by local residents. Some construction and skilled operating employees are brought into a county through contracts and nationwide hiring. Other workers migrate to the area in response to job opportunities, higher wages, and local economic conditions. COALTOWN explicitly assumes that wages will rise to the level required to induce net migration sufficient to cover the shortfall or surplus from employment demand not met by the local labor force. Net migration is a func- tion of population of the county, migration in the prior year, wage level, b] The stochastic equation is in Appendix C, Appendix table 2. 4 ------- employment change, and relative employment participation. _7/. Net migration into a county is a flow of people. Some migration will come about as a re- sult of the population size of an area without change in the economy. Other migration will occur as a result of prior changes including prior migration, employment changes in a prior period, and changes in employment participation. The equilibrating force is a change in wages — increases hold residents and attract migrants, and decreases precipitate some outmigration of residents and tend to discourage inmigrants (3)., The model calculates the ancillary wage necessary to attract or to discourage enough migrants to fill jobs not taken by local residents and the migrants who responded to economic signals in prior periods. Dynamic Interactions Interrelationships among the variables of the model are much more compli- cated than Figure 1 implies (10, 11). The estimating equations, for instance, include lagged variables which allow the model to capture some of the dynamics of the adjustment process from the old levels to the new levels of population and employment. COALTOWN summarizes the dynamic features of the adjustment process. These features can be highlighted by an examination of the equations themselves and by an example. The equation for ancillary employment and its estimated coef- ficients imply (a) incremental employment multipliers which are larger for small communities than for large communities; (b) variations in employment multipliers depending upon the spatial setting of the county; (c) increases in employment multipliers through time; and (d) discrete changes in multipliers following a growth shock (10). An evaluation of the equation estimating the ratio of employment to popu- lation shows that (a) the ratio will increase given rapid increases in labor demand, and (b) then will gradually trend toward a ratio that is slightly less than the U.S. level as labor demand stabilizes. A brief example also can characterize some of the dynamic relationships accompanying adjustments. Assume an initial rapid increase in primary employ- ment. Ancillary employment, the employment participation of residents, migra- tion, wages, and population levels all change in that year. The effects of these changes will reverberate through the system the next year, and in succeeding years. Variables which affect the estimates in succeeding years are identified in Figure 1. Most new employment at high growth rates is filled by migrants rather than increases in employment participation. Because migration accelerates, population grows more rapidly than when local residents supply the bulk of the labor. The dynamics of the socioeconomic component of COALTOWN subsequently feeds into the local government expenditure and revenue parts of the model. ]_l A stochastic net migration equation is in Appendix C, Appendix table 3. It is used to estimate an ancillary wage index in the model. ------- State and Local Revenues State and local government revenues and intergovernmental revenue flows are calculated through a series of accounting identities (Figure 2). Each State has a different tax and aid system, so separate models are required (12, 13, 14). The revenue accounting programs of COALTOWN are adopted from earlier modeling by Thomas Stinson at the University of Minnesota. jB/ The tax systems in each State also change as their respective Legislatures act. State, county, city, and school revenues are calculated for each year in the simulation as are all formula aids available to local governments. Inter- governmental revenues distributed by categorical grant or those which become part of a trust fund are totalled separately insofar as possible. The revenue calculations are dependent upon mill levies supplied by the user. These conventionally are assumed to be at or near the levels existing in the base year. If revenues are deemed inadequate for a function, then the necessity of a mill levy increase is implied. If a revenue surplus is in- dicated, then a decrease in taxes at some time in the future is implied, depending upon the flexibility of the State and local tax system. Figure 2—General structure of the revenue segment of COALTOWN User inputs Inputs from : Model socioeconomic : outputs of segment of model : revenues by source Tax related characteristics of energy project Initial assessed values in county State & local tax laws Mill levies Total employment Ancillary wages Population State revenues Severance Electricity production Property School Income Sales County revenues Property School Sales School revenues City revenues Property Sales Intergovernmental transfers J5/ The revenue accounting programs are adapted from the ENGYTX Model developed by Thomas F. Stinson (7_, 8). Tax information for each State was prepared by Stanley W. Voelker (14), Layton Thompson (12, 13) and Stinson (9) These subsequently have been updated for publication by Stanley W. Voelker. jlSSSSS-SB'iS ------- Interrelationships among the tax and the socioeconomic components of the model are complex. Energy projects affect assessed values, employment, wages, and population which in turn influence government revenues as well as expen- ditures. Local Government Expenditures Expenditure estimates for counties and schools are estimated using each period's anticipated population (11). Expenditure estimates are a weak com- ponent of the model due to the data which are available, but the estimating equations are statistically significant. COALTOWN compares local revenues and expenditures but the user is cautioned against inappropriate interpreta- tions from the estimates. In most instances, the revenue data should serve as a guide against which planned rather than estimated expenditures are compared. Expenditures for capital items and the timing of capital expenditures and expected revenues are critical to assessments. COALTOWN provides guidance on the timing and extent of population change but makes no attempt to forecast the level or timing of capital expenditures by local governments. PRINCIPAL USES OF THE COALTOWN MODEL COALTOWN is designed to assess the impact of future energy development projects. Results from a baseline scenario without the proposed energy pro- ject are compared to the results from scenarios which include the energy projects in order to assess impacts on employment, population, migration, and revenues which result from a project. A clear distinction should be made between an economic assessment and an economic forecast. An economic forecast is conditional on the accurate prediction of those factors which are used as data in the model. For ex- ample, one may not be able to accurately predict the future fiscal impact of an energy development project because future tax laws are unknown. How- ever, one can assess the fiscal impacts taking the existing tax legislation as given. These results help assess the adequacy of the current tax structure for meeting future needs. The user may test the sensitivity of the results to special background conditions by assuming alternative data inputs. This procedure helps to assess the importance of certain policy variables in addition to yielding a forecasted range for the economic indicators of interest. It should be em- phasized that uncertainty about background conditions tends to cancel out in the comparison of the baseline results and the results which include the energy-related facility. The three principal uses of the COALTOWN simulation then, are as follows: 1. It can be used to predict the absolute levels of population, employ- ment, migration, and other impact variables for planning purposes. ------- 2. It can be used to assess impacts due to a specific project for purposes of evaluation. 3. It can be used to assess the sensitivity of the results to various measures as an aid to policy analyses. INFORMATION SUPPLIED BY THE USER The user supplies two types of information: data regarding the energy project itself, and background information related to the region where the development will take place. These are labeled 'exogenous variables' in Figure 1. Information about the project itself includes the number of workers directly employed in operating and constructing the proposed facility in each year, the megawatts of electricity generated or the tons of coal mined each year, and optionally, the employment ratio of the migrant population. Necessary background information regarding the region includes the initial population of the county, projected State and local mill rates, assessed value of property, the number of people currently in the ancillary and basic sectors, distance to a regional trade center, and the size of the largest town in any adjacent county. A detailed list of input variables is presented in Appendix A. DATA GENERATED BY THE MODEL The output generated by COALTOWN is, to a large extent, self-explanatory. An example of the printed output is illustrated in Figure 3. The user has an option of choosing a summary output which lists the major economic indicators and fiscal impacts for each year, or a complete output which includes detailed revenue statistics for each year. The COALTOWN output generates the following information for each year of the simulation run: the number of workers employed by primary industries, the number of workers employed in ancillary jobs, the number of non-farm proprietors (owners of businesses and self-employed persons), total employment, relative real wages in the service sector as a percent of the base year, migration, population, the employment to population ratio, and the number of school chil- dren. Summary statistics for State, county, school and town revenues are also given along with estimates of school and county spending. The detailed tax output (Figure 4) breaks revenues into the following categories: coal severance, gross proceeds, taxes on electricity generation, other taxes generated by mines and generators, taxes on people and businesses (for example, income, liquor, cigarette, and auto registration taxes), and intergovernmental flows. Information is also given regarding revenue sources peculiar to each State, such as the Wyoming sales tax, the school foundation program, or trust funds. ------- Figure 3—Example of summary output of COALTOWN, example county - Montana Northern Great Plains scenarios - with new mines . : Energy : All : : : project : econ. base : Year 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 Year 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 : Tons mined 8699999. 11699999. 11699999. 12699999. 14199999. 17000000. 17500000. 18000000. 21500000. 23399984. 25000000. : Labor mkt. : index 1.4764 1.0701 1.1054 1.3286 1.4386 .9047 1.0701 1.0701 1.3316 1.2257 1.2007 : workers 1541. 675. 552. 880. 1797. 2476. 2967. 2432. 1399. 1289. 1306. . : Migration 2741. -276. -184. 509. 1961. 1427. 1011. -255. -285. -59. 101. : employment : 2680. 1806. 1675. 1995. 2904. 3576. 4059. 3516. 2476. 2358. 2368. ; ; : Emp/pop. : .4624 .4009 .4022 .4225 .4425 .4617 .4778 .4613 .4063 .4085 .4160 Ancillary employment 1827. 1965. 2051. 2176. 2386. 2667. 2946. 3157. 3268. 3424. 3602. Town size 3585. 3370. 3245. 3813. 5836. 7336. 8430. 8263. 8066. 8094. 8282. : : : : : Proprietors: 326. 333. 340. 341. 331. 315. 303. 306. 323. 329. 332. : : : School kids: 2744. 2687. 2655. 2804. 3335. 3729. 4016. 3972. 3920. 3928. 3977. Total employment 4833. 4103. 4066. 4512. 5621. 6558. 7308. 6979. 6066. 6111. 6302. Population 10451. 10236. 10111. 10679. 12702. 14202. 15296. 15129. 14932. 14960. 15148. :::::: :Per capita Year 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 : State : : revenue : 11756551. 15348542. 15415457. 16840624. 19203488. 22782224. 23787392. •25299696. 29706400. 31608928. 33345296. County : revenue : 872082. 1220390. 936882. 779505. 943750. 712809. 727580. 865689. 1059055. 1081122. 1099309. School : Town revenue : revenue 2919474. 180484. 3050717. 180882. 3240355. 177572. 3130495., 192040. 3642712. 248178. 4063318. 294704. 4330040. 331543. 4457834. 335793. 4645040. 335459. 4677916. 342211. 4742510. 353620. : County : spending 1167721. 1152104. 1143006. 1184081. 1324652. 1423826. 1493764. 1483226. 1470717. 1472506. 1484432. : School : : spending : 2286656. 2240318. 2213475. 2335542. 2769914. 3091306. 3325111. 3289508. 3247422. 3253427. 3293576. town revenue 50.34 53.67 54.72 50.37 42.53 40.17 39.33 40.64 41.59 42.28 42.70 All values are in 1970 dollars (or that specified by a user). All revenue is reported for the year in which the tax liability is generated. No allowance is made for lags in assessment or payment. ------- Figure 4—Example of detailed revenue of COALTOWN, example county - Wyoming Northern Great Plains scenarios - without new mine 1975 revenue amounts by type and jurisdiction Sev. or GP taxes Other mine taxes People taxes Total taxes Intergov. flows Net revenue Wyoming 437759.69 256678.44 4058922.00 4755359.00 -3003154.00 1752205.00 109439.88 23707.44 580528.19 831624.44 165703.75 997328.19 School district 191337.38 41448.56 3446778.00 3679563.00 2245920.00 5925483.00 Town .00 .00 608013.06 864776.94 591531.69 1456308.00 The county share of local sales tax revenue is: 117949.13 The town share of local sales tax revenue is: 256763.88 State aid available for local impacts, but not automatically rebated, amounts to 437759.69 of State taxes generated locally. Note: All taxes are reported for the year in which the tax liability is incurred. THE PREDICTIVE ACCURACY OF ESTIMATING PROCEDURES Differences in employment and population due to spatial patterns and temporal variations in economic activity appear to be summarized well by COALTOWN equations. These equations account for a very large proportion of the variations in reported values of employment, employment participation, migration and population of the 181 sample nonmetropolitan counties for the period 1971-74. Seven counties in the Northern Plains are destined to be major coal producers in the next decade. Population values estimated by COALTOWN equa- tions are compared with observed values for these counties in Table 1 for the 1970-77 period. Other estimated values are reported in Appendix tables 4-5. The spatial and temporal influences of mining and conversion are accounted for in the counties. The accuracy of the estimates appears to be especially noteworthy be- cause these major coal counties exhibited different growth patterns. These patterns range from stability to rapid change as indicated by observed employ- ment over the period. McLean, North Dakota had stable employment, and esti- mated population tracks well. Both Big Horn, Montana and Converse, Wyoming 10 ------- Table 1—Equation estimates _!/ and observed values, population 2] 1970-77, seven Northern Plains counties with coal mining and/or conversion Year 1970 1971 1972 1973 1974 1975 1976 1977 : Big : est. 10,213 10,203 9,967 9,998 10,240 10,681 10,663 10,199 Horn obs. 10,063 10,109 10,330 10,352 10,498 10,934 10,590 10,675 : Rosebud : est. 6,196 6,233 6,195 6,427 7,013 11,899 9,239 9,480 obs. 6,044 6,106 6,419 6,857 7,826 9,652 9,886 10,503 : McLean : est. 11,799 11,538 11,472 11,331 11,316 11,810 11,903 12,630 obs. 11,322 11,671 11,563 11,443 11,472 11,600 11,851 12,272 : Mercer : est. 6,370 6,253 6,136 6,192 6,550 6,762 6,147 6,713 obs. 6,170 6,184 6,180 6,169 6,279 6,404 6,720 7,039 : Campbell : est. 13,587 12,978 13,226 12,233 12,794 14,231 14,542 17,521 obs. 13,049 12,820 12,489 12,295 12,035 13,103 14,540 16,759 : Converse : est. 5,943- 6,903 6,528 6,416 7,177 8,117 8,596 10,072 obs. 6,072 6,630 6,672 6,866 7,162 8,029 9,363 10,687 : Sheridan : est. 18,106 18,260 17,810 17,856 19,517 20,175 20,380 21,951 obs. 17,865 17,984 18,123 18,832 19,177 19,924 21,012 21,619 _!_/ Coefficients from Temple (1978) applied to revised BEA 1969-77 data. Coefficients were estimated from unreyised data for 181 nonmetropolitan counties 1970-74 (11). 2_/ All current year values are estimated and any lagged values in estimating equations are observed values of~revised BEA data 1969-77. ------- exhibit a relatively stable employment until 1974. Estimated population is very close in each case despite the change in later years. The Decker mine, at that time one of the largest in the Nation, was just starting operations in Big Horn County. No new energy projects were initiated in Converse County in this period. Rosebud, Montana and Mercer, North Dakota were the sites of power plant and mine construction, and coal mining was being initiated in Campbell County, Wyoming in this period. Population in Rosebud County was overestimated in 1975, the year of completion of construction of power gener- ators. Despite those causes of rapid change, the population estimates are extremely close. Finally, Sheridan County, Wyoming is the site of a city and the recipient of impacts from Campbell and Big Horn Counties. Although the economic conditions in these counties were different and certainly uncharac- teristic of the region, the COALTOWN equations performed extremely well in estimating population. Total population is found by dividing estimated total employment by the estimated employment to population ratio. Total employment is the sum of primary employment and the estimated values for ancillary and non-farm propri- etors. An inaccuracy in any one of the estimates in the population calculation will produce errors. That is illustrated by the 1974-75 population estimates in Campbell County when unusual conditions prevailed there but for which no adjustment was made. Workers commuting into Campbell County distorted the employment participation rate. For most accurate results when unusual condi- tions are known to exist, COALTOWN users should incorporate that information beforehand into the model. LIMITATIONS OF THE MODEL Any simulation model has inherent limitations. The model's structure and the validity of its coefficients are basic considerations. COALTOWN'S structure is purposely simple and uses aggregate variables which can be predicted most accurately. Even though it is simple, dynamic interrelation- ships among variables often make it difficult to follow through the logic of a change in one part of the model. Thus, the aggregate level of prediction and the simplicity of structure allow more accurate forecasting but at a loss of some detail. A common limitation of all simulation models is that their accuracy declines for each year into the future for which predictions are made. In- accurate estimates in early years tend to accumulate and to reduce the accuracy of later estimates. In addition, structural changes in the economy which are not anticipated by the model are likely to occur in the long run. An example is the trend upward of the service to base ratio and the employment ratio. These trends probably will not continue at the same pace in the long run. Thus, the model should be viewed as a near term assessment model. The amount and accuracy of input data supplied by the user is important for the same reason. Inaccurate input data produce inaccurate estimates in early years, and these become inputs in each successive year so that errors build up over time. Some examples may illustrate this problem. Data for the 12 1 ------- employment directly associated with a project and with future projects are critical for an accurate evaluation, but they are seldom known with certainty. The labor force participation rates of new migrants coming into the region are even more difficult to anticipate in the future. They depend on the duration of the project, the characteristics of the local housing stock, the possibility of building temporary housing for construction workers, the size of families, and many other factors. As mentioned previously, this type of uncertainty can be evaluated by testing a range of alternative values for input variables. Uncertainty associated with particular input variables which may affect the outcome of a baseline run (for example, the projected growth rate of other basic sectors) will not be as important when doing an impact assessment com- paring a "with" and "without" simulation as when forecasting the absolute levels of the impact variables for use in planning. Another important shortcoming of COALTOWN is its inability to allocate new population to locations within the county and region. This information would prove useful in assessing fiscal impacts on school districts and towns. The problem is compounded when energy impacts spill over.to surrounding counties, because the magnitude of the spillover cannot be estimated and allocated by the model. The user must make a judgement about the distribu- tion of workers within the county. COALTOWN does not predict the industries which may move into a region as a result of energy development. This type of secondary development could prove to be significant in some areas. For example, energy intensive industry might be drawn to a region to take advantage of low power rates. Manufacturing in- dustries which serve the needs of the energy sector might also be drawn to a region undergoing intensive coal development. The model will underestimate future growth to the extent that secondary industries are attracted to a location. COALTOWN uses employment as a key variable although income is conceptually preferable. Employment is used because county agricultural income data are not reliable, and COALTOWN applies to rural counties where agriculture is im- portant. Each job is implicitly assumed to have the same impact on the region. For instance, when the effects of income associated with coal royalty payments to individuals are investigated, the user must translate these payments into equivalent employment units. The distribution of impacts among people and the social strains which emerge because of this is not addressed by COALTOWN. Definitive statements about different impacts of coal development among people cannot be made. The importance of such considerations should not be minimized. Residents of a region would be very interested in knowing how the benefits of future devel- opment might be distributed between current residents and newcomers. The impact of new development also may be quite different for each socioeconomic class. This information is relevant in assessing the benefits and costs, and the political implications of development. 13 ------- REFERENCES (1) Bender, Lloyd D. 1980 "The effect of trends in economic structures on population change in rural areas." Chapter 6, pp. 137-62 in David L. Brown and John W. Wardwell (eds.), New Directions in Urban-Rural Migration: The Population Turnaround in Nonmetropolitan America. New York: Academic Press. (2) Bender, Lloyd D., Thomas F. Stinson, George S. Temple, Larry C. Parcels, and Stanley W. Voelker 1980 "Impacts of coal mining and conversion in Northern Plains States." ESCS Staff Report. Washington, D.C.: U.S. Department of Agri- culture, The Economics, Statistics, and Cooperatives Service. (3) Bender, Lloyd D., George S. Temple, and David O'Meara 1977 "Relationships among migration streams and local economic condi- tions in the Northern Plains." Staff Paper 77-11. Bozeman: Montana State University, The Department of Agricultural Economics and Economics. (4) Conopask, Jeff V. 1979 "Modeling coal mining growth and change: Geographic and temporal perspective." Working Paper 7906. Washington, B.C.: U.S. Depart- ment of Agriculture, The Economics, Statistics, and Cooperatives Service. (5) Conopask, Jeff V. 1978 A Data Pooling Approach to Estimate Employment Multipliers for Small Regional Economies. Technical Bulletin 1583. Washington, D.C.: U.S. Department of Agriculture, The Economics, Statistics, and Cooperatives Service. (6) Myers, Paul R., Fred K. Hines, and Jeff V. Conopask 1977 A Socioeconomic Profile of the Northern Great Plains Coal Regions. Agricultural Economics Report 400. Washington, D.C.: U.S. Depart- ment of Agriculture, The Economics, Statistics, and Cooperatives Service. (7) Stinson, Thomas F. , and Stanley W. Voelker __.. 1978 Coal Development in the Northern Great Plains States: The Impact on Revenues of State and Local Governments. Agricultural Economics Report 394. Washington, D.C.: U.S. Department of Agriculture, The Economics, Statistics, and Cooperatives Service. (8) Stinson, Thomas F. 1978 "The effects of state taxation on coal mining in the Northern Great Plains." Proceedings of the American Institute of Mining Engineers, Council of Economics, (June)pp. 11-18. 14 ------- (9) Stinson, Thomas F. 1978 State and Local Taxation of Mineral Deposits and Production. Rural Development Research Report 2. Washington, D.C.: U.S. Department of Agriculture, The Economics, Statistics, and Cooperatives Service. (10) Temple, George S. 1979 "The spatial and temporal distribution of service activities among small rural areas." Paper presented at Western Regional Science Association, San Diego, California (February). (11) Temple, George S. 1978 "A Dynamic Systems Community Impact Model Applied to Coal Devel- opment in the Northern Great Plains." Ph.D. Dissertation. Bozeman: Montana State University. (12) Thompson, Layton S., and Willard D. Schutz 1978 Taxation and Revenue Systems in Wyoming. Bulletin RJ127. Laramie: University of Wyoming, Wyoming Agricultural Experiment Station. (13) Thompson, Layton S. 1978 The Taxation and Revenue Systems of State and Local Governments in Montana. Bulletin 701. Bozeman: Montana State University, Montana Agricultural Experiment Station. (14) Voelker, Stanley W., Fred R. Taylor» and Thomas Ostenson 1978 The Taxation and Revenue System of State and Local Governments in North Dakota (Revised 1978). Agricultural Economics Report 128. Fargo: North Dakota State University, The Department of Agricul- tural Economics. 15 ------- APPENDIX A DATA SUPPLIED TO COALTOWN The following is a comprehensive list of all exogenous data variables which the user inputs into the COALTOWN model. Each variable is described briefly. Identification The title of the scenario. County name. The number of scenarios to be analyzed for a particular county. The number of counties to be analyzed. The one digit code associated with Montana (1), North Dakota (2), or Wyoming (3) The last year of the scenario (the first year of the scenario is assumed to be 1975 as the program now stands). Definition of Scenario and Setting of the County The tons of coal mined in the county in each year of the scenario. The number of jobs in the energy sector during each year of the scenario. This includes miners, power plant operators, and energy project construction workers. Other primary workers in agriculture, manufacturing, mining other than coal mining, Federal government, and the basic portions of the transportation and construction industries. All wage and salary employees not in the primary sectors. _!_/ Number of nonfarm proprietors. _!/ The ratio of total employment (including proprietors) to total population. _!/ Net migration. _!/ The ratio of total ancillary income (in thousands of dollars) to the number of ancillary employees plus nonfarm proprietors. _!_/ County population. _!/ _!_/ Provided for the initialized year of the model only. 16 ------- The number of workers employed in the primary industries in adjacent county with the largest primary employment. Distance (in miles) from the largest town in a county to the Rand McNally Regional Trade Center. Population of the largest town in the county. \j Population of the largest town in any adjacent county. Revenues and Expenditures The actual sales price of a ton of coal measured in 1970 dollars. County sales tax applicable only to Wyoming counties. Projected mill rates in each year for the State, county, school district, and town respectively. Average assessed values for: (1) detached homes, (2) mobil homes, (3) apart- ments, (4) cars, and (5) trucks respectively. The ratio of actual to estimated county spending (this correction factor makes estimated expenditure figures more realistic for the particular county being investigated). The ratio of actual to estimated school spending (this correction factor makes estimated expenditure figures more realistic for the particular county being investigated). The ratio of commercial property value (in dollars) to ancillary employment. A vector with two values tells the number of cars per capita and the number of trucks per capita respectively. Total taxable value of all property in the county. The amount (measured in megawatts) of electric power generating capacity in the county in 1974. The projected amount (measured in megawatts) of electric power generating capac- ity in the county for each year of the scenario. Data for Special Options Whether the user desires a detailed tax printout. The employment/population ratio if migrants are assumed to have a different one than the existing population in the county. \J Provided for the initialized year of the model only. 17 ------- Whether new basic energy workers will not live within the county's largest town. Whether energy development will include the construction of thermogenerating plants. Whether the user will input rates of growth for the basic sectors in the object county as well as the basic sectors in the adjacent counties. Whether the user will input a vector of coal royalty payments (this may be the case if coal development will occur on Indian land - the royalty payment will be converted into employment equivalents by dividing total yearly payments by the average basic yearly wage). Coal royalty payments applicable to coal development on Indian land. Projected values for the employment/population ratio of migrants. In cases where there is a large influx of temporary workers and a shortage of family housing units, this value will tend to be much higher than the employment/ population ratio of current county residents. The fraction of migrant workers not living in the major town in the county in each year of the scenario. The annual rate of growth of the basic sectors in the adjacent county with the largest number of basic employees. The annual rate of growth (or decline) of the basic sectors (other than energy related sectors) in the county being studied. The projected growth rate of the largest town in any adjacent county. 18 ------- APPENDIX B CHARACTERISTICS OF DATA USED IN ESTIMATING COALTOWN Data used for estimating the principal parameters of the model have cer- tain advantages, but also imply limitations. Employment, income, and popula- tion estimates, 1970-74 are from the Bureau of Economic Analysis, Department of Commerce. They are estimates which are revised successively as information becomes available, and the coefficients of the model are subject to error from that source. A combined cross section and time series analysis is dictated for this reason (4_, _5). The observations are 181 Northern Great Plains counties which are nonmet- ropolitan in character — rural counties. The economies of these counties are relatively uncomplicated (6) yet provide a range of conditions for application of the modified economic base approach. Employment Employment data for counties are compiled by the Department of Commerce from several sources. Wage and salary statistics are the most thorough and accurate of these because they are derived from unemployment compensation records filed by firms. Estimates of the number of proprietors are from these and other sources such as the Internal Revenue Service. Farm labor and espe- cially farm proprietors and their incomes are the least accurate due to the coverage and nature of the reports available. Employment is the number of jobs reported by an establishment. Second and part-time jobs are included. JDouble counting of unknown magnitude is inherent in the data. The county location of the reporting establishment rather than residence of the worker is reported. Although commuting across county boundaries is not common in the rural portions of the Northern Great Plains, it can be charac- teristic of rapid growth areas, especially during construction of major facil- ities. For these reasons, the exact distribution of the population in and among counties is not known. The industry detail of employment data in this study is the one-digit SIC level. Disaggregation below that at the county level is probably unreliable. Income Income of wage and salary workers by industry, and farm and non-farm pro- prietors also is reported by the Department of Commerce. Income data are pre- preferred for economic analysis in most economic base studies. Income data appear to be inappropriate in counties dominated by agriculture. First, coverage of the agricultural wage and salary employment is incomplete. Second, farm income is allocated to the county level from estimates of state totals 19 ------- each year, hence, is an inaccurate measure. Finally, farm income is a poor measure of economic activity in agriculture because it varies greatly even when farm production and household expenditures do not. Population Population estimates reported by the Department of Commerce are those generated to allocate Federal revenue sharing funds. The estimates are an average of several estimates and are adjusted to agree with state totals. Regression estimates are based upon variables such as school enrollments and vehicle registrations. Other estimates are based on vital statistics, medical records and tax data. The estimation method may vary from state to state and estimates are revised periodically. Changes in size of family, presence of school children and age composi- tion of families in rapid growth areas can result in inaccurate population estimates. The model allows user specification of different employment to population ratios for inmigrants in order to reflect rapid growth conditions. 20 ------- APPENDIX C STOCHASTIC ESTIMATION OF COALTOWN PARAMETERS 21 ------- Appendix table 1—Estimating employment in Northern Great equation for ancillary Plains counties, I/ 2/ Equation : Estimated : F :coefficients: statistics Definition of variables Dependent variable ANCEMP. Independent variables & coefficients a 1 ANCEMP t-1 a 2 BASE. BASEt D ADJBASE 6 BASEt_1 a7 BASE(._1 D 9 ADJBASE j 110 Waget_1 'It Ancillary empl.; total empl. minus basic empl. in year t -32.91643 Constant 1.04194 3/ ANCEMP in prior year 0.42970 79.06 BASE is defined as no. of agricultural employees & farm proprietors, empl.in mining, forestry & fishing, manuf., & Federal govt. plus any employees in trans.& const, over the regional avgs. -0.00305 7.58 The distance to a Rand McNally Region- al trade center multiplied by BASEt - .000005 0.83 Distance to trade center squared multiplied by BASEt 0.12597 23.70 BASEt which is largest in any of the adj.counties multiplied by the ratio of the size of the largest local town to the largest town in any adj. county -0.42446 70.50 BASE in the prior year 0.00338 8.87 Distance to a trade center multiplied by BASEt_i 0.000005 0.63 Distance to a trade center squared multiplied by BASEt_l -0.13680 28.04 ADJBASE in prior year 0.00008 0.17 Mean salary & earnings, thou.per yr.of ancillary employees & proprietors mul- tiplied by size of largest local town Error Statistics R2 F S.E.E. Mean of ANCEMP d.f. 0.99 3/ 126.07 2353.67 713.00 JL/ Two parallel ancillary employment equations were subsequently estimated for use in the COALTOWN model. One equation has wage & salary ancillary workers as its depen- dent variable & the other uses non-farm proprietors as a dependent variable. 2J Coefficients were estimated using two-stage least squares on a data base of 181 rural Northern Great Plains counties for 4 years, 1971-1974. _3/ Larger than 10,000. 22 ------- Appendix table 2—Estimating equation for employment ratio in the Northern Great Plains counties, _!_/ : Estimated : F ! Equation 21 :coefficients: statistics Definition of variables Dependent variable RELLFPRt Independent variables & coefficients RELLFPR t_1 PCEMP 0.037 0.961 6493.58 0.602 122.98 The county employment population ratio relative to the U.S. ratio, in year t Constant RELLFPR in prior year Percent change in total employment from prior year to year t b PCEMP^ 62t Statistics R2 F S.E.E. Mean of RELLFPR d.f. -2.314 44.48 Square of PCEMPt Error 0.90 2173.24 0.05 1.008 720.000 JY Coefficients estimated using two-stage least squares on a data base of 181 counties for 4 years, 1971-1974. 2/ All estimated values rounded. 23 ------- Appendix table 3—Estimating equation for net migration in Northern Great Plains counties, _!/ Equation : Estimated : F : :coefficients: statistics : Definition of variables Dependent variable Net migration in year t Independent variables & coefficients CQ 81.8002 cl POPINt -0.0080 25.17 c, MIG. , 0.5961 266.13 <£ L~ 1 c3 EXPONENT^ 60.3945 198.35 CA EMPCHt 0.4719 24.90 c5 EMPCH2 -0.0001 14.79 c, RELLFPR^ , -72.0162 0.89 o t— 1 e3t Statistics R2 0.68 F 259.49 S.E.E. 293.94 Mean of MIG 50.32 d.f. 717.00 Constant Population in year t, prior to migration MIG in prior year Base e carried to the power {2(wage-5.0)} 2/ L. ' Total employment change from prior year Square of EMPCH RELLFPR in prior year _3/ Error ' \J Coefficients estimated using two-stage least squares on a data base of 181 rural Northern Great Plains counties for 4 years, 1971-1974. 2J Wages defined as mean salary and earnings, thou. per year, of ancillary employees and proprietors. _3/ RELLFPR is defined as the county employment ratio relative to the U.S. ratio in year t. Note: In the actual COALTOWN Simulation Model this equation was used to estimate the wage level. Migration was used as an independent variable (see appendix E). 24 ------- APPENDIX D PREDICTIVE ACCURACY OF ESTIMATES FOR SELECTED COUNTIES 25 ------- Appendix table 4—Equation estimates JL/ and observed values, ancillary employment, non-farm proprietors and employment per 100 population, "2J 1970-77, seven Northern Plains counties with coal mining and/or conversion Year Big est. Horn obs. Rosebud est. obs. McLean : est. obs. : Mercer : est. obs. : Campbell est. obs. Converse est. obs. Sheridan est. obs. - Ancillary employment - 1970 1971 1972 1973 1974 1975 1976 1977 1970 1971 1972 1973 1974 1975 1976 1977 1,389 1,760 1,828 1,744 1,818 1,908 2,015 2,066 290 305 253 272 266 281 288 273 1,684 1,757 1,678 1,724 1,821 1,916 1,954 2,136 300 249 267 264 279 287 276 291 1,138 1,110 1,160 1,301 1,361 1,423 1,490 1,587 1,670 1,803 1,973 2,320 2,408 2,324 2,410 2,256 237 228 231 233 236 215 218 227 229 269 258 328 342 334 345 352 2,015 2,083 2,052 2,059 2,056 2,244 2,460 2,617 - 482 448 412 389 385 406 408 413 1,998 1,997 1,966 1,989 2,159 2,304 2,388 2,549 Non-farm 441 405 384 379 400 403 411 432 1,081 1,051 1,083 1,090 1,126 1,211 1,274 1,353 1,450 1,549 1,641 1,558 1,558 1,659 1,732 1,931 proprietors - 251 232 236 209 212 204 206 204 204 218 219 222 229 230 233 242 2,533 2,619 2,691 2,642 2,784 2,721 2,844 2,826 3,007 3,068 3,326 3,688 4,002 4,244 4,704 4,982 479 472 488 446 453 460 470 443 447 448 445 470 465 502 486 528 1,376 1,467 1,501 1,627 1,752 1,936 2,210 2,479 297 295 287 306 306 326 353 398 1,349 1,468 1,611 1,649 1,781 2,042 2,264 2,487 292 281 299 302 324 350 397 418 4,475 4,597 4,818 5,141 5,435 5,543 5,897 6,508 833 857 841 868 875 905 907 908 4,545 4,688 4,998 5,094 5,200 5,497 5,862 6,164 827 830 848 863 906 907 928 977 - Employment per 100 population - 1970 1971 1972 1973 1974 1975 1976 1977 36.10 38.20 37.96 37.32 37.00 35.36 34.72 35.47 38.63 38.35 36.29 35.97 37.76 34.58 34.98 37.23 40.86 41.64 42.68 45.21 46.79 45.58 48.20 46.28 48.23 44.94 33.29 53.83 49.39 46.05 42.68 38.50 40.22 40.89 39.46 40.27 40.67 40.18 43.12 45.69 41.70 39.99 38.90 39.58 40.53 41.12 42.89 46.62 39.50 40.50 39.99 40.31 41.77 42.10 44.78 45.85 47.83 51.66 50.98 52.95 51.24 47.21 49.87 49.73 41.26 43.29 39.46 39.93 41.80 43.94 45.14 44.75 46.66 50.02 48.85 57.16 58.89 61.10 61.61 67.27 44.06 43.94 46.45 46.27 45.34 46.11 50.72 50.34 42.93 45.52 46.29 43.31 45.99 48.49 47.63 47.72 44.03 44.66 46.39 47.50 46.32 45.93 48.21 49.16 44.79 45.52 46.08 44.90 45.52 46.38 46.65 47.25 _!_/ Coefficients from Temple (1978) applied to revised BEA 1969-77 data. Coefficients were estimated from unrevised data for 181 nonmetropolitan counties 1970-74 (11). 2/ All current year values are estimated and any lagged values in estimating equations are observed values of~~revised BEA data 1969-77. ------- Appendix table 5—Simulated predictions of employment-population ratio and population, and percent deviation from observed 1971-74, seven Northern Plains counties with coal mining and/or conversion _!/ to Year 1971 1972 1973 1974 1971 1972 1973 1974 Big pre. Horn : % dev. : Rosebud pre. % dev. : McLean : : pre. % dev. : Mercer pre. % aev. : Campbell : : pre. % dev. : Converse pre. % dev. Sheridan pre. % dev. - Employment-population ratio - .3839 .3910 .4051 .4228 -1.01 7.39 10.24 9.53 .4243 -7.21 .4391 -5.82 .4615 -1.39 .4752 3.76 .4367 .4393 .4590 .4646 2.93 6.39 7.54 6.08 .4150 -2.06 .4255 -4.24 .4491 -7.49 .4693 -12.71 .4026 4.12 .4230 -8.10 .4395 -7.47 .4576 -14.43 .4375 .4413 .4385 .4582 -1.97 -2.10 1.33 0.37 - Population - 10,269 10,150 9,869 10,097 1.57 -1.46 -4.56 -3.69 6,276 2.78 6,369 -0.48 6,364 -7.70 6,501 -15.20 11,554 11,422 11,314 11,307 -1.39 -1.53 -1.81 -1.66 6,372 2.63 6,372 2.77 6,380 2.52 6,822 6.53 12,934 -3.76 13,465 15.09 13,206 7.66 13,701 15.55 6,723 6,659 6,392 6,721 1.57 -0.61 -7.43 -5.83 .4347 .4379 .4545 .4669 r 18,295 18,096 17,791 18,061 -2.20 -1.36 1.03 1.05 1.02 -0.57 -5.75 -6.19 _!/ Simulated predictions using system-generated values of estimating equations. ------- APPENDIX E 1. 2. 3. 4. 5. 6" 7. 8. 9. 10. 11. 12. THE SYSTEM OF EQUATIONS ANCEMPt = aQ + ANCEMP^ + BASEt + BASEt x DIST + BASEt x DIST + ac ADJBASE + a, BASE , + a., BASE , t-1 , t-1 x DIST + a0 BASE , x DIST + a_ ADJBASE 0 8 , t-1 WAGEt_1 x TOWN + RELLFPRt = bQ + RELLFPR^ + POPI c, RELLFPR,. , + b t-i */ — In GOVlt + d±1 In POPNt + PCEMPt + bj PCEMP. + C e2 (WAGEt ~ 5) + c 1,2,3 Q, = ANCEMP + BASE Qst ' Qdt = POPIt x RELLFPRt x USLFPRfc MW = MIG x RELLFPR x USLFPR POPNt = POPIt CEMP = Q - MIG , t-1 CEMP where: ANCEMP = ancillary employment BASE = economic base DIST = distance to trade center ADJBASE = adjacent economic base WAGE = ancillary earnings divided by ancillary employment TOWN = town size RELLFPR = employment participation rate relative to the U.S. rate PCEMP = percentage change in employment ^J Equation 3 was used in the COALTOWN Simulation Model to predict the wage level. Net migration was computed using identities 5 through 9 and the predicted values for ANCEMP and RELLFPR . 28 ------- MIG = net migration POPI = indigenous population CEMP = change in employment GOV = government spending POPN = total population Qd = labor demand Qs = labor supply MW = migrating workers LOCW = local workers USLFPR = U.S. employment participation rate Equations 1 through 4 are stochastic, 5 through 12 are identities. This gives 12 equations in 12 unknowns: ANCEMPfcJ LFPRt, PCEMP , MIGt, WAGEt> CEMPt> GOVit , POPN , Q, , Q , MW , LOCW . Equations 1, 2, and 3 were estimated using 2SLS. 29 US GOVERNMENT PRINTING OFFICE 1981-757-064/0303 ------- Environmental Protection Agency Information Cincinnati OH 45268 Fees Paid Environmental Protection Agency EPA-335 Official Business Penalty for Private Use, $300 Special Fourth-Class Rate Book i--f, uOuO.i?'? _„ ,,--r--rv it S {- •-', V I K t'Pil 1'bC f i i-''- A OH '•- C ¥ PM.IHJ 5 MSRAKI p p *-' i *" £- '* 11- Please make all necessary changes on the above label, detach or copy, and return to the address in the upper left-hand corner If you do not wish to receive these reports CHECK HERE D, detach, or copy this cover, and return to the address in the upper left-hand corner EPA-600/7-80-146 ------- |