NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Non-Cointegration and Econometric Evaluation of Models of Regional Shift and Share

Scott J. Brown, N. Edward Coulson, Robert F. Engle

NBER Working Paper No. 3291
Issued in March 1990
NBER Program(s):   ME

This paper tests for cointegration between regional output of an industry and national output of the same industry. An equilibrium economic theory is presented to argue for the plausibility of cointegration, however, regional economic forecasting using the shift and share framework often acts as if cointegration does not exist. Data analysis on broad industrial sectors for 20 states finds very little evidence for cointegration. Forecasting models with and without imposing cointegration are than constructed and used to forecast out of sample. The simplest, non-cointegrating models are the best.

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Document Object Identifier (DOI): 10.3386/w3291

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