Modelling the dynamics of regional employment-population ratios and their commonality

Abstract

This paper looks at movements over time in regional employment–population ratios, an important and much neglected determinant of regional performance. We utilise data on gross flows into and out of employment and focus on information contained in the transition rates. The paper applies an unobserved components econometric model to a panel of Australian data to identify and explain the evolution of regional employment–population ratios over time. The approach identifies a common (i.e. nationwide) factor while allowing for region-specific effects, including region-specific impacts of the common factor. The contribution of the common factor to changes in regional employment–population ratios ra..