1998 Kentucky Annual Economic Report |
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Full Document
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Contents |
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| Quarterly Forecasts for the Kentucky Economy, 1998 - 2000 | ||
| Eric C. Thompson | ||
| The Kentucky economy is forecast to
experience moderate growth from 1998 to 2000. Gross state product is forecast to grow at a
2.6 percent annual rate, with total employment growing by 1.9 percent and total personal
income by 2.0 percent. Growth in the Kentucky economy is also expected to be broad-based
with all major industry groups except mining adding employment. The largest growth is
again forecast for the services and retail trade sectors, although the manufacturing
sector will be a source of major improvement in 1998. Professional specialty occupations
that require high education levels and service occupations are forecast to have the
largest growth for the next three years. Finally, Kentucky’s population is expected
to grow at a 0.6 percent annual rate from 1998 to 2000, with older population groups
growing at higher rates than younger groups.
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| U.S. Financial Market Outlook: Can the Bull Gallop On? | ||
| Donald J. Mullineaux | ||
| The U.S. financial markets performed
well during 1997, although equity markets showed unusual fluctuation late in the year.
Short-term interest rates remained near the levels prevailing in 1995-1996, while
long-term rates trended downwards, as inflation remained subdued. Stock markets continued
to provide robust returns, but equity prices became highly volatile towards year end. The
outlook for 1998 calls for much the same scenario, provided that the real economy
continues to grow in the 2.0-2.5 percent range and inflation remains low. Returns to stock
investors should moderate from the abnormally high rates of 1995-1997, however. Any signs
of sharply accelerated growth in 1998 are likely to be accompanied by interest rate
increases and a stock market sell-off, while an economic slowdown will bring lower
interest rates.
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| Education and Earnings in Kentucky, 1964 - 1996 | ||
| Mark C. Berger | ||
| Kentucky’s efforts in the
1990’s to reform its primary, secondary, and higher education systems has focused
attention on the importance of education to later success in the job market. An analysis
of data from 1964 to 1996 shows that people who complete college will earn about 60
percent more than those who only complete high school, while those with graduate or
professional degrees earn about twice that of high school graduates. Moreover, dropping
out of high school has large negative effects on a person’s earnings, with male high
school graduates earning about 40 percent more than male high school dropouts. In
addition, this earnings penalty for dropping out of high school is larger in Kentucky than
in the rest of the United States, and in Kentucky it is larger for men than for women.
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| Kentucky’s Per Capita Personal Income: The Role of Women and Education | ||
| Robert W. Cox | ||
| In 1975 and in 1995, Kentucky’s per
capita personal income was at about 80 percent of the national average. While per capita
incomes in other Southern states—including Georgia, North Carolina, and
Tennessee—have increased relative to the national average during that time period,
Kentucky’s fell in the mid-1980’s before returning to around 80 percent in 1995.
Evidence suggests that average earnings have failed to rise at a rate that will bring
Kentucky’s average toward the national average. Increasing labor force participation
by Kentucky females who have relatively low education levels provides a strong case for
the failure of earnings to rise as they take low-skill, low-paying jobs. Labor force
participation by females may increase in the future, so per capita income may still not
rise unless the educational attainment of Kentucky’s adult population is
improved.
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| The Retirement Behavior of Kentucky Families | ||
| Dan A. Black and Amitabh Chandra | ||
| By comparing the retirement behavior of
married men to single men across different education levels and over time, we establish
the following facts: First, the labor force participation (LFP) of older men across
all education levels has been falling over time. Second, there have been
significant declines in the LFP of the "younger old," those ages 55-61.
This result holds up across different education levels, implying that it is not only the
less-skilled workers who are retiring sooner. Third, the number of married
households where only the husband works has been declining over time, whereas the number
of married households where the wife works has been increasing over time. The
retirement dynamics in Kentucky are similar to those for the United States but the
magnitudes of the changes over time are larger in Kentucky than for the United States.
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| The Changing Market for Electricity in Kentucky | ||
| Frank A. Scott | ||
| The electric power industry is currently
undergoing some dramatic changes. Regulatory and technological changes have paved the way
for competition in the generation of electricity. In the future, residential, commercial,
and industrial customers will be able to choose their energy supplier. This study analyzes
what a competitive market for electric energy would look like in a twenty-state region
surrounding Kentucky. From supply and demand analysis, the short-run price of electric
power is predicted to be 2.1 cents per kilowatt-hour. The long-run price is predicted to
be 3.0 cents per kilowatt-hour. The actual price paid by consumers would be higher because
it would include transmission and distribution costs as well.
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| Economic Impact of Interstate Highways in Kentucky | ||
| Eric C. Thompson and Amitabh Chandra | ||
| The construction of interstate highways
can have significant and wide-ranging effects for residents of a county and for that
county’s economy. Specifically, interstate highways will create road user benefits
that will be experienced by all residents of an area. These benefits include savings in
travel time, lower accident costs, and lower vehicle operation costs as a result of the
new interstate. Restricted-access interstate highways allow motorists to drive at higher
speeds than on other types of highways, and fewer accidents occur on the wider and
straighter interstate highways. In addition, counties will experience employment and
earnings impacts as a result of a new highway. Existing businesses will have lower
operating costs due to the highway and new businesses may locate there because of the
improved transportation, providing additional job opportunities to local residents.
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