Spatial employment dynamics in regions of South Carolina, 1970--2000

This study analyzes the effects of employment growth shocks on regional labor markets over time and space in South Carolina over the period 1970--2000. A VAR methodology and a spatial econometrics technique are adopted and the Blanchard-Katz (1992) model is extended for this study. The purposes of this study are: (1) to investigate the regional labor market dynamics in response to basic employment shocks, (2) to identify spatial effects of employment growth shocks in adjacent areas on the own labor market, and (3) to provide a deeper understanding the labor market adjustment process ultimately shedding light on the potential for public policy interventions for stimulating growth in rural South Carolina.; To analyze the dynamics of South Carolina regions to basic employment shocks, a structural VAR method is used and total regional employment is bifurcated into basic and nonbasic sectors. The empirical results find that a basic employment growth shock has positive permanent effects on basic employment in all regions and there exist regional differences in the long run multiplier impact of basic employment. It is suggested that job-creation incentive programs to attract manufacturing plants may not be helpful in reducing regional unemployment in some regions even in the short run since newly created jobs may go to in-commuters or potential in-migrants rather than local residents.; Using a spatial econometric technique, the extended Blanchard-Katz model identifies the spatial effects of employment growth shocks in the nearby counties on own county. Rural-urban linkages are also tested for within the Blanchard-Katz model for South Carolina LMAs. The findings suggest that a county whose adjacent counties are growing is likely to more benefit from the spatial spillovers of job growth in its surrounding counties. With regard to the rural-urban linkages, the empirical results suggest that, in only some regions, does employment growth in metro areas have significant spillover effects on employment growth in surrounding rural counties. Employment growth in nearby nonmetro areas also has substantial but smaller impact on employment growth in metro areas. In this study, spatial spillover effects are significant but limited to some regions such as Greenville and Spartanburg LMAs.