Modeling demographic-employment interactions in an urban economy

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Abstract
This paper describes a simulation model of the economy of the St. Louis Standard Metropolitan Statistical Area. The model focuses on the opera tion of the area's labor market. It uses (a) an age-specific regimen for predicting changes in population and (b) the concept that the area's unemployment level is inversely related to the area's exports. The validity of the model is tested by setting its initial conditions to the 1960 values of the vari ables in the model and running it forward to 1970. The resultant errors are then analyzed and, with two exceptions, found to be small. The exceptions are analyzed and hypotheses to explain them are outlined. The authors conclude that the model should be useful in finding the key areas in the local economy and in experimenting with economic policies to assess the long-term impact of alternate policies on the local economy. A systematic simulation study is then designed, and approximately 100 runs are made. Analysis of these runs indicates (a) that the transportation-equipment industry is the key industry in the area and (b) that increasing its growth rate by 2 percent annually over the USA national average for that industry, combined with a 0.1 decrease in the relative cost ratio (compared to the national average) of labor in the durable-fabrication area, would have a very marked effect in reducing unem ployment in the St. Louis area.

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