Economic Analysis Flashcards
- Separate the economy into basica and non-basic
Total = basic + non-basic
Basic = export, bring in money from the outside
Ex. Tourism
Non-basic= local/service, recirculates the outside money. Ex. local retail stores.
Most sectors have a mix of both. This is simplification.
- Economic Base Multiplier
Multiplier = total job number/basic job number
Indirect effect of $1 additional basic (direct) activity on the economy = multiplier -
$1 basic (direct) activity turns into multiple dollars (base multiplier).
Total effect - direct effect = indirect effect.
Use employment data to divvy up basic vs. non-basic sectors. Also use SIC (old) and NAICS (new) sector classifications.
Economic Base Analysis
Look at relative share of sector (Ex. manufacturing employment) in a region relative to total employment in a region compared to the relative share of sector (ex. manufacturing employment) in a nation compared to total employment in a nation.
Based on employment figures.
Location quotient > 1 = an export/basic sector (more manufacturing employment in that region than the nation at large).
Location quotent < 1 = local/non-basic sector (fewer manufacturing employment in that region than the nation at large).
Use fraction of that emplyemnt over 1 to estimate basic employment. County business patterns - try to do at finest sectoral detail available - gets more difficult as you go down and deeper into each sector.
Tied to economic base analysis - it’s how you determine economic base analysis.
Location Quotient
Description of economy (identity)
Decomposition of employment growth by sector.
National component (share)
Industry component (mix)
Regional component (shift) - helps ID sectors that are doing better/worse than rest of the country - good for eco. devo.
By Sector:
Shift Share (SS) = National Share (NS) + Industry Mix (IM) + Regional Shift (RS).
Components:
National Share = Total national growth rate applied to regional employemnt.
Industry Mix = National growth rate for particular sector and applies to local employemnt and subtracts national share from that. This reflects how a regional sector may be different from nation at large.
Regional Shift = regioanl employment in specific sector compared to national employment in that specific sector. Can be negative = lagging sector. Positive = leading sector.
Shift-Share Components
General equilibrium model for an economy.
Used for multiplier analysis.
Many assumptions - including fixed technology.
Total producetion = intermediate production + final demand.
Input-Output Tables
Transactions table = inter-indsutry flows (which sector buys from which sector). Assumes this table of flows is fixed and translates to technical coefficients.
Technical coefficients table = proportion of inputs.
Total output = intermediate output + final demand.
Government performs this for planners.
Computable general equilibrium models and econometric models.
Input-Output Analysis (Leontieff)
