Three papers in regional economics: energy productivity convergence, water resource planning, and workforce occupation-industry dynamics

This dissertation research consists of three papers that use the perspectives of regional economics to examine three key engines of economic growth -- technology, natural resource and human capital, by taking spatial heterogeneities and relationships into consideration. The first paper empirically tests the trade-facilitated technology spillovers in the convergence of energy productivities at the disaggregated manufacturing sectors across European Union (EU) countries. The second paper develops a multi-objective non-linear optimization model to simulate the tradeoffs between streamflow restoration and economic welfare loss in a Chicago suburban county - McHenry County. The third paper establishes a dynamic modeling framework to explore the occupation-industry linkages and decipher an array of labor market signals. The first paper (chapter 2) differs from most previous empirical convergence studies in the economic growth literature by considering a relatively high degree of sectoral detail - 10 NACE (classification of economic activities in the European community) manufacturing sectors. To account for potential spatial heterogeneity and dependence in regional growth, this chapter adopts a spatial version of energy productivity equation, and extends the single equation cross-sectional setting to time series observations of cross-sectional setting. It reformulates the spatial convergence regression equations into a spatial panel data model with individual (country & industry) effects and uses the panel data procedure for estimation. Under the ??-convergence spatial panel-data approach, the estimated coefficients of ?? are almost all negative and statistically significant. This shows EU countries with low starting energy productivity witness relatively faster growth of energy productivity, and former Eastern-bloc EU countries are catching up to more advanced economies in energy efficiency levels. The estimation results present evidence that energy productivity convergence is conditional upon the cross-country differences in steady-state characteristics. The findings also provide insightful implications for energy and trade policies. It helps project trends in energy productivity and can be used to estimate the sector-specific emission under the European Union's Emissions Trading Scheme (EU ETS). It also affirms that trade does appear to aid technology transfer and therefore promoting trade between advanced countries and less developed countries becomes necessary. The second paper (chapter 3) intends to create planning strategies to promote sustainable economic growth while protecting the natural environment by minimizing the occurrence of low streamflows. Steams and associated biological communities are among our most valuable natural resources. Humans rely on the environmental services provided by streams in a myriad of ways. However, in some areas, excessive groundwater pumping exacerbates the already critical pressure on streamflow and needs to be managed through effective planning. Based upon economic and hydrogeological concepts, this paper calculates the amount of streamflow depletion due to groundwater pumping and estimates the negative impact on the socio-economic system if groundwater pumping has to be constrained to restore streamflow. An evolutionary algorithm is used to solve the optimization model and to identify the tradeoff curve (or Pareto frontier) between economic welfare loss and stream flow depletion. The multi-objective optimization is conducted at both county and municipality levels. Comparing municipal Pareto frontiers shows us spatially heterogeneous costs of preserving streamflow through various "shadow prices" and also the different capacity of restoring streamflow. It discusses the shapes of the Pareto frontier, the sensitivity of the pumping boundary constraints, and the sensitivity of return flow coefficients. It concludes that the multi-objective optimization model provides a useful framework to consider conflicting objectives in a typical environmental management and planning process, and that the findings can help decision makers and planners in formulating effective groundwater pumping strategies. The third paper (chapter 4) seeks answers toward regional labor market dynamics, such as industry-based or occupation-based growth, the sensitivity of occupational demand according to industrial performance, and well-connected industries that show higher multiplier effects in generating jobs. The increasing integration of the world economy has demonstrated the critical need to identify industries and an associated skilled workforce that could help regions maintain their competitiveness. The challenge is to align human capital with current and emerging trends of the regional economy. Bi-causative analysis and hypothetical industrial extraction method are adapted to serve these purposes, with applications to both state and national levels in the U.S. between 2005 and 2008. The findings derived from these linkage studies offers insights on spatially heterogeneous distribution of occupation-based growth, and help identify key industries that cast major demand for each occupation and well-connected industrial sectors that have stronger multiplier effects to generate job growth. Careful monitoring of these signals by manpower planners may provide a means of identifying trends in the balance of skills demand that can be used to detect structural changes in the regional economy and guide manpower planning practice. It provides a basis for determining the desirable level of public and private expenditure on specific education and training programs, and necessary assistance to industries