Economic Analysis Flashcards
Economic base analysis
looks at basic and non-basic economic activities. Basic activities are those that can be exported, while non-basic activities are those that are locally oriented. The exporting industries make up the economic base of a region.
Basic activities
those that can be exported. The exporting industries make up the economic base of a region.
Non-basic activities
those that are locally oriented
three major economic analysis methods
economic base, shift-share, and input-output analysis
location quotient
Needed to identify economic base industries.
Ratio of an industry’s share of local employment divided by its share of the nation.
LQ less than 1
indicates an importing economy
LQ more than 1
the area is an exporting economy
Shift-share analysis
analyzes a local economy in comparison with a larger economy. This analysis looks at the differential shift, proportional shift, and economic growth.
uses employment information by sector for two points in time.
Input-output analysis
a quantitative method that links suppliers and purchasers to determine the economic output of a region.
Requires a large amount of data so it’s expensive.
Input-output analysis can be used to determine the employment effect that a particular project has on a local economy.
How is input-output analysis similar to economic base analysis?
it uses an economy’s structure to determine the economy in the future
Primary suppliers
do not purchase input for production. They typically purchase only final goods;
Part of input-output analysis
Intermediate suppliers
sell outputs to either intermediate or final purchasers
Part of input-output analysis
Intermediate purchasers
buy outputs from others and use them as inputs to produce outputs
Part of input-output analysis
Final purchasers
use their inputs as final goods
Part of input-output analysis
3 tables of input-output analysis
transactions, direct requirements, total requirements
Assumptions of input-output analysis
Input-output analysis assumes that there are no economies of scale, that technology and labor are static, that inputs are not substitutable, and that each industry only produces one group of goods. Consumption of inputs is constant and there are no national imports or exports. An economy’s total output is equal to total production plus intermediate sales.
North American Industry Classification System (NAICS)
standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data about the U.S. economy.
What is the difference between basic and non-basic employment?
Basic is an export, it brings in money from the outside.
Non-basic is local, recirculates the outside money
What is the economic base multiplier?
Multiplier = total jobs/basic jobs
The indirect effect of $1 additional basic activity on the economy = Multiplier-1
What is the equation for determining a location quotient?
Ratio of the relative share of a sectors employment in the region o the relative share of employment in the country
What kind of data is used to determine the location quotient?
Employment data, such as contained in the County Business Patterns
What are the different components involved in shift-share analysis?
national component (share), industry component (mix), regional component (shiftt)
What does it mean if the regional shift is negative?
A negative regional shift happens when the growth in the local employment is less than the growth nationally
What are the components of total production in input-output analysis?
Total production is decomposed into intermediate production (production to make other products) and final demand.
What is a transactions table in input-output analysis?
The transaction table shows the inter-industry flows.
Which sector buys from other sectors and how much.
