A Wisconsin Fixed Effect

Wisconsin’s unemployment rate has dropped to 2.8 percentage points in April. The national rate is 3.9 percentage points. Proof of Walkernomics success? Well, since on average Wisconsin’s unemployment rate is typically 0.9 percentage points below, the answer is “no”. Consider the Wisconsin and US unemployment rates.


Figure 1: Unemployment rate for United States (blue), for Wisconsin (red). NBER defined recession dates shaded gray; Walker administrations shaded orange. Source: BLS, DWD, NBER.

I estimate the mean differential for 1986-2010 (the Great Moderation period pre-Walker) using OLS, and show the actual, the mean differential and the 90% prediction interval, below.


Figure 2: Unemployment rate differential US minus WI, in percentage point (black), estimated mean (red), and 90% prediction interval. Walker administrations shaded orange. Source: BLS, DWD, NBER, and author’s calculations.

Since I have not incorporated HAC standard errors, I am actually understating the width of the prediction interval.

To sum up: Wisconsin is doing just about as well as one would expect given historical pattern relating the national and Wisconsin unemployment rates. (And in any case, we shouldn’t be paying much attention to state-level unemployment rates because of the sampling error.)

3 thoughts on “A Wisconsin Fixed Effect

  1. Bruce Hall

    Menzie,

    There does seem to be a bit of contradictory conclusions drawn from various data sources:
    • State level unemployment is, at best, directional but not really accurate
    • State employment is accurate (from the same source?) https://www.bls.gov/regions/midwest/wisconsin.htm#eag
    Wisconsin is doing just about as well as one would expect given historical pattern relating the national and Wisconsin unemployment rates.
    • Wisconsin (Walker) is underperforming in new jobs
    • Wisconsin’s population is growing slowly. https://www.census.gov/quickfacts/fact/table/WI/PST045217
    • Wisconsin’s retired population is growing faster than it’s workforce population https://www.dhs.wisconsin.gov/publications/p0/p00138a.xls
    • Wisconsin’s economic policies are worse than they could be (Minnesota)
    • Wisconsin’s economic policies are better than they might be (Illinois)
    • Economic policies mean less than they predominant business sectors (high tech/health care versus old line industries)
    • High tax states do better than lower tax states (Minnesota v. Wisconsin)
    • Low tax states do better than high tax states (Wisconsin v. Illinois) https://taxfoundation.org/state-and-local-sales-tax-rates-in-2017/

    In conclusion, Yes… or is it No?

    Reply
  2. Steven Kopits

    So, how’s the grading going?

    Here’s the body count since we last communicated on this topic on May 14:

    Died in Mexican interior or desert 22
    Raped 1,348
    Kidnapped / Extorted 329
    Assaulted and Robbed 2,192
    Deterred Entrants (Turned Around) 1,315
    Extended Incarceration 1,096
    Economic migrant drug smuggling 493
    Forced Prostitution, Labor 241
    Total 7,036

    Take your time. No rush.

    Reply

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