An Application of the Stock Adjustment Model in Estimating Employment Multipliers for the South Central Louisiana Petroleum Economy 1964–84

Abstract

ABSTRACTThe South Central Louisiana Petroleum Economy received an economic rent from its petroleum resources during the energy crisis of the 1970s and early 80s. A differential export‐base model incorporating a geometric lag was developed for estimating dynamic employment multipliers. This technique is especially applicable to regional economies in which exports are a major economic factor. Employment multipliers were estimated using ordinary least squares (OLS) regression. Results from the analysis indicate that agriculture, oil and gas mining, and manufacturing are highly significant employment generators. Both long‐run and short‐run employment multipliers were derived from the model. It is estimated that a five‐dollar change in the real price of crude oil will result in a long‐run employment change of 8,027 for the oil and gas mining industry. Based on estimates of the long‐run multiplier, this will result in a total employment change of 28,014 for this economy.