Economic Analysis

Question 1

Economic Base Analysis - Principles

Answer 1

1. Follow the money/Jobs
2. Direct and indirect effects, multiplier analysis
3. Economic Impact Analysis, cost benefit analysis

Question 2

Multiplier Analysis

Question 3

Economic Base Analysis

Answer 3

Separate the Economy into Basic and Non-Basic
- Total = basic + non-basic
- Basic = export, brings in money from the outside (i.e. tourism)
- Non-basic = local/service, recirculates the outside money (i.e. local retail stores, banking, etc.); not always that clear-cut

Economic Base Multiplier
- Multiplier = total/basic
- The indirect effect of $1 additional basic (direct) activity on the economy = multiplier - 1

Question 4

Economic Base Analysis in Practice

Answer 4

Determine Basic and Non-Basic Sectors
- Use employment data
- SIC (old) or NAICS (new) sector classifications

Methods
- Empirical approach (makes assumptions)
- Minimum requirements (compare to a reference)
- Location quotients

Question 5

Economic Base Multiplier

Answer 5

The ratio between total and basic employment. Give a measure of how much additional value is created in the region for an additional dollar of outside money (hence, it multiplies that money).

Question 6

Location Quotient

Answer 6

A ratio of two ratios.
Principle
- Relative share of a sector in region compared to relative share of sector in nation
- Based on employment figures (e.g., County Business Patterns)

LQi=(Locali/Local)/(Nationali/National)
- LQi>1 is an export/basic sector
- LQi<1 is a local/non-basic sector
- Use fraction over 1 to estimate basic employment

Question 7

Shift-Share Analysis - description of what is going on in the economy

Answer 7

Decomposition of Employment Growth by Sector
- national component (share)
- industry component (mix)
- regional component (shift)

Leading and Lagging Sectors
- separate out national and industry trends
- use regional shift to target leading sectors

Question 8

Input-Output Analysis - used for multiplier analysis

Splits out production that delivers to other sectors, and production that delivers to final demand

Answer 8

General equilibrium model of an economy (Leontieff)
- many assumptions
- fixed technology
- total production = intermediate production + final demand

Input-Output Tables
- transactions table = inter-industry flows (who buys from whom)
- technical coefficients table = proportion of inputs

Question 9

Bureau of Economic Analysis

Answer 9

RIMS II - Regional Input-Output Modeling System

Question 10

Regional Research Institute