The document discusses three cutting edge economic techniques for assessing regional innovations: input-output analysis, counterfactual analysis, and records linkages. Input-output analysis uses tables to organize data on production and consumption across industries and calculate economic multipliers. Counterfactual analysis uses models to examine hypothetical scenarios and their implications. Records linkages match youth and unemployment data to study employment outcomes over time while preserving confidentiality.

1. Cutting Edge Economic Techniques for Assessing Regional Innovations Rose M. Baker David L. Passmore

2. Penn State Workforce Education & Development Initiative Rose Baker David Passmore Program Manager Workforce Assessment Center & Assistant Professor of Education Professor & Director Penn State Institute for Research in Training & Development

3. Symposium presentation web site http://innovationeval.notlong.com

4. Reports are available Through links on web site: • Two Economic & Workforce Brief reports. • Electricity rate cap study. • Gas royalty impact study. • Links to reports about records linkage processes.

5. Three assessment techniques

6. < Input–Output Analysis > • Economic & Workforce Brief Series •

7. The economy is like a ball of string < complex > < intertwined > < large > < unexpected >

8. Way to organize data < input-output tables > Summarize production & consumption.

9. producer/purchaser data… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output producers purchasers

10. Producing & purchasing multiplies… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output

11. Multipliers Economic impact of change in final demand. Calculated for output, income, employment, taxes, and other factors. Show total effects of change on economy. Expressed as a positive number.

12. Multipliers display three components of change Direct. Indirect. Induced.

13. Direct effects Changes in production as a result of immediate effects of a change in final demand. E.g., increase in demand for autos increases production of autos.

14. Indirect effects Changes in production in industries supplying industry delivering the final product. E.g., increase in auto production increases production in supplying industries (like glass, steel, plastics).

15. Induced effects Changes in direct and indirect production increase income and, therefore, consumption (and, maybe saving). E.g., workers in auto industry and supplying industries spend and save their income, creating additional economic activity.

16. Two types of multipliers Type 1 = Type 2 =

17. Two examples of input-output analysis Economic & Workforce Brief Series

18. < Counterfactual Analysis > • Electricity Rate Caps • • Gas Royalties •

19. A counterfactual analysis is… An analysis that goes counter to facts. What would happen if the U.S. invaded Iran? What would have happened if the U.S. did not go to war with Iraq? What would happen if gas prices rose to $6/gal. A “what if” analysis. Counterfactual reasoning reveals implications of counterfactual suppositions to be examined in case what is supposed actually happens.

20. REMI Policy Insight Model

21. Counterfactual analysis method

22. Two examples of counterfactual analysis

23. Regulation, Deregulation, Caps… Natural monopoly Generation Transmission Distribution Regulation Deregulation Rate Caps Stranded Costs

24. Methods… Baseline forecast of the Pennsylvania economy through 2015 Rate cap elimination forecast conducted by simulating 10% increase in electricity rates through 2015 Benchmark of effects of rate removal = Baseline forecast minus Rate elimination forecast

25. Preliminary findings… Impact on macroeconomy and demography depends on perspective Impact on individual households could be substantial

26. Impact on macroeconomy and demography… Substantial, in terms of absolute numbers Small, as a % of total economy and demography

27. Impact on individual households… Small, but real, risk of job and income loss Risks and changes affect low income household more than high income households

28. Hot off the presses…. • Marcellus shale is creating exciting opportunities for natural gas exploration, extraction, and sales. • Lease rights are being negotiated. • Royalties will be paid. • “ What if” royalty income affects the Pennsylvania economy.

29. Counterfactual findings of impact of gas royalty income

30. < Records Linkages > • Youth in Transition •

31. How do we follow youth in transition from school to work?

32. Survey-based approaches with out–of–school youth Difficult to find. Difficult to maintain contact. Difficult to stimulate response. Difficult to obtain sensitive data elements.

33. One solution: Link youth and unemployment insurance records Employers report quarterly wages by social security number to state unemployment insurance system. Social security numbers of youth and a vector of indicators can be merged with insurance records. Confidentiality is preserved by procedural security buffer as well as by statistical means.

34. Potential for learning from records linkages Cross–sectional and longitudinal employment by industry. Cross–sectional and longitudinal wages by industry. Geography and geographic and industrial mobility of youth employment. Youth employment turnover by industry. Correlates of youth employment, wages, and mobility.

35. Some problems with implementing records linkages Errors in records of youth or employer Social Security numbers Names Youth not necessarily in covered employment. Censored data Reporting period is 3 months Many transitions can occur within reporting period

36. Penn State records linking project currently in process Project funded by the Central Pennsylvania Workforce Development Corporation is developing a methodology to link records of school dropouts and youth aging out of foster care with UI employment and wage data.

37. Cutting Edge Economic Techniques for Assessing Regional Innovations Rose M. Baker David L. Passmore