Labor Market Dynamics in West Virginia and the Appalachian Region

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Virginia Tech


This dissertation consists of three manuscripts analyzing labor market dynamics in West Virginia and the Appalachian Region. The first manuscript examines the dynamic effects of national, regional, and local labor market shocks on labor force participation rates in Appalachia. A dynamic factor model with time-varying loading parameters and stochastic volatility is used to explore the synchronicity and divergence between state labor force participation rates within and outside the Appalachian region. We find that the choice of time and state is crucial to the relative importance of the level of synchronization on observed change in LFPR variations. Our findings can help better target labor policy by taking advantage of the sensitivity exhibited by each state to various labor market conditions. The second manuscript examines the dynamic effects of state, Metro/Non-Metro, and county labor market shocks on labor force participation rates in West Virginia. In the first stage, using a dynamic factor model, we find that non-metropolitan and county-specific components are dominant contributors to the observed variations in the change in West Virginia LFPRs. In the second stage, using a fixed effects panel model, we find county demographics, education levels, income, access to interstate highways, and industry composition are useful covariates for explaining the variance contributions of the state, metro/non-metro and county factors. The third manuscript uses cointegration analysis in the presence of structural breaks to determine whether the Unemployment Invariance Hypothesis exists in West Virginia. Using monthly labor force data from 1976 - 2022, we find mixed support for the unemployment invariance, added worker effect, and discouraged worker effect hypotheses over multiple sub-sample periods. These results suggest that labor markets are temporally-dynamic, and a one-size-fits-all approach could prove disadvantageous to growth.



Labor Force Participation, Unemployment, Appalachian region, West Virginia, Time-Series Analysis, Bayesian Analysis