Research
CRER White Papers on the Regional Economy
- WP6 - Origins and Destinations of Chattanooga's Young Adult Migrants
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This paper uses a unique dataset on the migration of young adults between commuting zones to analyze the most common origins and destinations of Chattanooga’s young adult migrants. Many more young adults moved into Chattanooga than moved out of it, but Chattanooga’s net in-migration rate was much lower than those for large areas such as Nashville and Atlanta. Generally, there was a hierarchy of migration according to area size: Chattanooga received many more young adult migrants from small areas nearby but sent many more to large areas both near and far away. Parental income was strongly related to the likelihood of migration and the destinations and origins of Chattanooga’s young adult migrants.
- WP5 - The Demographics of Chattanooga Employment Growth
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The Chattanooga metro economy has experienced higher-than-average employment growth for the past decade. This paper examines how this manufacturing-led boom has meant higher employment to population ratios for every major demographic category, despite the major disruption of the COVID pandemic. It finds that the benefits of Chattanooga’s boom have been felt by every age group, race, and education level examined. The biggest gains were experienced by those aged 20 to 44, men, African Americans, and those with a college degree or high school diploma as their highest education. Other notable observations include that, by 2022, blacks and whites in Chattanooga were about as likely to be employed, and the largest employment gap between Chattanooga and the rest of the country is for those with less than a high school diploma.
- WP4 - The Past Ain't What it Used to Be: Chattanooga Employment Revised Upward
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In March, the Bureau of Labor Statistics (BLS) released revised estimates of state and metro area nonfarm employment. As a result, more than 4 thousand jobs were added to the estimated total employment in the Chattanooga metro area. Revisions of this sort are an annual occurrence and can lead to dramatic changes in what we think happened in the past. This year’s revisions, for example, indicate that three-year job growth for 2021-2023 was 25.9 thousand rather than the already booming 21.6 thousand. These numbers will be revised again in a year when estimates for 2021 and 2022 are subject to routine tweaking and the estimates for 2023 get new benchmarks. Revisions of the scale seen this year are not unusual, but they have become more common since the COVID pandemic.
- WP3 - Recession and Recovery in Chattanooga, 1990-2023
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Although recessions are usually thought of as national-level events, there can be substantial differences across states and metro areas in when they occur. This paper determines and compares the timing of recessions for Chattanooga and four nearby metro areas. In part because it experienced its own recession in 1997, recession has been more common in Chattanooga than elsewhere since 1990. This fact combined with its relatively large manufacturing sector and relatively small education and health sector has meant that Chattanooga’s job losses during recessions have tended to be larger than average. Chattanooga’s continuing reliance on manufacturing suggests that future recessions will be as costly as past ones. On the other hand, area’s manufacturing sector has been transformed and is much more competitive than during previous recessions.
- WP2 - Economic "Causality" Among Chattanooga and its Regional Neighbors
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Chattanooga is situated at the literal crossroads between Atlanta, Birmingham, Knoxville, and Nashville, whose combined employment growth rate over the past 10 years was nearly double the national average. A full understanding of the Chattanooga metro economy requires an understanding of how it interacts with these large metro areas in its booming region. This paper tries to untangle the interregional links by testing for Granger-causality, or predictability, between metro areas within the region. It finds that higher growth in the Atlanta, Knoxville, and Nashville metro areas tends to be followed by higher growth in the Chattanooga metro area. The signs and magnitudes of these effects are useful for forecasting the near future of the Chattanooga labor market.
- WP1 - Chattanooga Metro Employment, 1990-2023: Decline, Recovery, and Transformation
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Over the past decade, the Chattanooga economy has undergone a manufacturing-led resurgence and has experienced job growth that has been significantly higher than the national average. Over the period, the manufacturing sector changed from one dominated by non-durable goods such as food to one dominated by durable goods such as automobiles. This recent resurgence is in contrast with the overall performance of the Chattanooga economy since 1990. Between then and the end of 2023, the total number of non-farm jobs grew by about 75 thousand but would have grown by almost 90 thousand if the area had grown as fast as the rest of the country. Other than the COVID recession, Chattanooga was hit harder by recessions than was the rest of the country, and it even had its own recession in the mid-1990s.
Recent Academic Publications
- Howard J. Wall, The Great, Greater, and Greatest Recessions of U.S. States, Journal of Regional Analysis & Policy, 53(1), 2023, 34-58.
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This paper examines state-level differences in the timing, depth, and total employment effects of the Great Recession. It finds that several states were in recession prior to the official start of the recession, while more than a dozen states didn’t enter recession until six months or more after it. States’ exits from recession were similarly staggered. As a result, 11 states’ recessions were one year long or shorter, while the recessions for five states were at least 24 months long. Further, there were geographic patterns to the spread of the recession across states. I use these state-level estimates to introduce a new approach for calculating the total effects of recessions on state employment, one that accounts for lost employment growth as well the decrease in employment. States formed distinct geographic groupings according to these total effects, with states in the West and Southeast tending to have seen the greatest harm. Finally, many of the state-level differences in the effects of the Great Recession were related to differences in industry mix and the prevalence of sub-prime mortgages. The states with the longest and deepest recessions also tended to have been those with the highest shares of subprime mortgages.
- Howard J. Wall, Sex and the Business Cycle, Applied Economics, 55(17), 2023, 1958-1971.
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This paper reconsiders the differences between the sexes in the depths, lengths, timing, and employment effects of recessions in the United States. I find that, prior to the mid-1980s, female employment was in recession less frequently than male employment, but that the opposite has been true since then. Also, monthly employment growth forgone because of recession was roughly the same for women and men prior to the mid 1980s, but was substantially greater for men afterwards. Accounting for the sex-specific timing of recessions, as well as for forgone employment growth, (1) the negative effects of recessions on both female and male employment are much larger than is usually found, (2) male employment is hit relatively harder by recessions, and (3) the difference between the sexes in the employment effects of recession is much smaller than the previous literature indicates.
- Scott Neiderjohn, Mark Schug, and Tawni Ferrarini, Teaching About Today’s Economy by the Numbers, Social Education, 87 (2), 2023, 74-82.
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By early 2023, in the aftermath of the active COVID-19 pandemic, the U.S. economy had a mismatched set of economic indicators. The economy had surprisingly strong areas like the labor market, along with troublesome weak spots such as stubborn inflation. Recession indicators briefly flashed “caution” in 2022 but then stabilized. This article provides an overview of basic economic indicators that highlight this puzzling situation. These indicators include Gross Domestic Product (GDP), the unemployment rate, interest rates, and inflation. Graphs of these statistics will provide a macroeconomic road map of what has been going on in the economy. This article also features a “Then and Now” teaching activity comparing and contrasting the stagflation of 40 years ago with the current economy.
- Howard J. Wall, Student Outcomes and Spending on Teachers in the Aftermath of Recession, Missouri Policy Journal, 12(1), 2022, 15-24.
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This paper finds a link between the trends in K-12 spending and student success in Missouri after the Great Recession. I find that, for city schools only, changes in English Language Arts and Math proficiency rates for third graders were negatively related to changes in the number of students per teacher. According to my estimates, an increase in the average number of students per teacher in city schools accounted for almost all of the drop in the schools’ average ELA proficiency, and all of the drop in their average Math proficiency. Thus, the evidence indicates that the cuts in spending on teachers in the aftermath of the Great Recession affected student outcomes in city schools, but did little to affect student outcomes in schools in other locales.
- Tawni Ferrarini, Teaching Economics with the Coolest Technology, Social Education, 85(2), 2021, 84-87.
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Economics and personal finance teachers and students enter classrooms everywhere with increased familiarity with quality digital resources and educational technology. The National Council for the Social Studies recommends taking advantage of media literacy to create a bridge between learning with technology and the use of technology in students' everyday lives. 1 Current educational technology (EdTech) tools permit instructors to benefit from various advancements in research on cognitive science, educational psychology, and learning behavior theory. Rich content and vast resources in economics and personal finance, combined with the use of EdTech tools, promise to excite multi-media students about learning and advancing their understanding of these two important subjects.
- Bento J. Lobo, Md Rafayet Alam, and Brian E. Whitacre, Broadband Speed and Unemployment Rates: Data and Measurement Issues, Telecommunications Policy, 44(1), 2020.
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We examine the effects of broadband speed on county unemployment rates in the U.S. state of Tennessee. We merge the older National Broadband Map dataset and the newer FCC dataset in lengthening our broadband access data over the period 2011–2015. Extending the dataset improves the precision of the estimates. Our panel regressions control for potential selection bias and reverse causality and show that broadband speed matters: unemployment rates are about 0.26 percentage points lower in counties with high speeds compared to counties with low speeds. Ultra-high speed broadband also appears to reduce unemployment rates; however, we are unable to distinguish between the effects of high and ultra-high speed broadband. We document beneficial effects of the early adoption of high speed broadband on unemployment rates. Better quality broadband appears to have a disproportionately greater effect in rural areas.
- Howard J. Wall, The Missouri-Wide Effects of City Earnings Taxes, Missouri Policy Journal, 9, 2020, 59-63.
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This essay provides new estimates of the effects of the earnings taxes levied by Kansas City and the City of St. Louis. These new estimates take advantage of new research suggesting that growth in outstate Missouri is partly determined by growth in the St. Louis metro area. That is, a one percentage point change in the employment growth rate for the St. Louis metro area will mean that the employment growth rate for outstate Missouri will change in the same direction by 0.3 percentage points the following year. Coupling this new research with estimates of the direct effects of earnings taxes on metro areas, I derive a more-complete picture of the effects of the taxes on Missouri as a whole.
- Ruben Hernández-Murillo, Interjurisdictional Competition with Adverse Selection, Journal of Public Economics, 173, May 2019, 85–95.
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In this paper, we study the welfare consequences of imposing alternative regimes of competition between two local governments that compete for mobile firms which have private information on their degree of mobility. Competition among jurisdictions raises the firms' rents to higher levels than if jurisdictions were to cooperate. Therefore, from the perspective of a utilitarian federation, constitutional constraints on the competition process may be desirable. We find that imposing a system of coarser policy instruments improves welfare relative to competition with discretionary instruments because it reduces the socially costly rents that are granted to firms in equilibrium. We also find that the gains from constraining competition to uniform policy instruments are maximal when communities are identical, but decline if the extent of asymmetry between locations (in terms of local market size or technological complementarities) increases.
- Amy Y. Guisinger, Ruben Hernández-Murillo, Michael T. Owyang, and Tara M. Sinclair, A State-Level Analysis of Okun’s Law, Regional Science and Urban Economics, 68, Jan 2018, 239–248.
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Okun's law is an empirical relationship that measures the correlation between the deviation of the unemployment rate from its natural rate and the deviation of output growth from its potential. This relationship is often referred to by policy makers and used by forecasters. In this paper, we estimate Okun's coefficients separately for each U.S. state using an unobserved components framework and find variation of the coefficients across states. We exploit this heterogeneity of Okun's coefficients to directly examine the potential factors that shape Okun's law, and find that indicators of more flexible labor markets (higher levels of education achievement in the population, lower rate of unionization, and a higher share of non-manufacturing employment) are important determinants of the differences in Okun's coefficient across states.
- Brian E. Whitacre, Md Rafayet Alam, and Bento J. Lobo, Econometric Error Nullifies Finding of the Impact of Broadband Speed on County-Level Employment, Information Economics and Policy, 44(C), 2018, 58-60.
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We examine the effects of broadband speed on county unemployment rates in the U.S. state of Tennessee. We merge the older National Broadband Map dataset and the newer FCC dataset in lengthening our broadband access data over the period 2011–2015. Extending the dataset improves the precision of the estimates. Our panel regressions control for potential selection bias and reverse causality and show that broadband speed matters: unemployment rates are about 0.26 percentage points lower in counties with high speeds compared to counties with low speeds. Ultra-high speed broadband also appears to reduce unemployment rates; however, we are unable to distinguish between the effects of high and ultra-high speed broadband. We document beneficial effects of the early adoption of high speed broadband on unemployment rates. Better quality broadband appears to have a disproportionately greater effect in rural areas.
- John B. Broughton & Bento J. Lobo, Herding and Anchoring in Macroeconomic Forecasts: The Case of the PMI, Empirical Economics, 55(3), 2018, 1337-1355.
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We test whether analysts display multiple biases in forecasting the Institute for Supply Management’s manufacturing purchasing manager’s index (PMI). We adopt a test that does not require knowledge of the forecaster’s prior information set and is robust to rational clustering, correlated forecast errors and outliers. We find that analysts forecast the PMI poorly and display multiple biases when forecasting. In particular, forecasters anti-herd and anti-anchor. Anti-herding supports a reputation-based notion that forecasters are rewarded not only for forecast accuracy but also for being the best forecast at a single point in time. Anti-anchoring is consistent with forecasters overreacting to private information. The two biases show a strong positive correlation suggesting that the incentives that elicit anti-herding also elicit anti-anchoring behavior. Both biases result in larger absolute errors, although the effect is stronger for anti-herding.
- Bento J. Lobo & Lisa A. Burke-Smalley, An Empirical Investigation of the Financial Value of a College Degree, Education Economics, 26(1), 2018, 78-92.
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We generate selection-adjusted NPV and IRR estimates for a bachelor’s degree in the U.S. which account for time-to-graduation, debt financing and tuition levels. We find that a college degree is generally worthwhile, but the private value of the investment is a declining function of time-to-graduation. Selection-adjustments show that for students at the lower end of the ability distribution and in some areas of study, a college degree may never be a good financial proposition; as such, we provide breakeven thresholds for tuition at which college remains viable. Debt financing generates higher returns but greater risk compared to self-financing.