Regional econometric model comparisons: What do they mean?: Fid-Bau Portal

Regional econometric model comparisons: What do they mean?

Taylor, Carol A.

Abstract Accuracy comparisons among substate regional econometric models are becoming a standard part of the regional modeling literature. The comparisons typically are made without regard to area-specific economic/demographic structural differences and area-specific variations in data scope and quality. Since we have no background for evaluating the importance of these regional-based accuracy determinants, it is difficult to interpret the comparisons in terms of methodological improvement. By maintaining a consistent modeling methodology and a consistent time horizon in construction of models for six diverse areas, this study identifies and analyzes area-specific factors affecting substate model accuracy. Particularly critical factors are found to be distribution of population change between net migration and natural increase, two-digit distribution of manufacturing employment, sectoral firm concentration, economic/demographic growth pattern, consistency of data and availability of sectorally-specialized data. Differences across areas in these structural factors are seen to affect major sector MAPEs by factors of two to six leading to the conclusion that scientific analysis of methodological improvement in substate econometric models is unlikely to be achieved by interarea model comparisons.