Geoscience Reference
In-Depth Information
Even a simple economic base model can be used for forecasting and impact
analysis.
2
In practice, however, regional economic models are typically complex
systems of simultaneous equations. Following Tiebout's call for a “broad theory of
income determination,” they predict an array of interrelated economic variables,
such as output, employment, and income. Some models add a demographic dimen-
sion, using economic variables to forecast net migration and population. Dynamic
regional econometric models are designed to not only estimate the total impact on
the economy of a given change (e.g., an increase in aircraft production) but also to
portray how the impact plays itself out over time.
Whether working with simple or complex models, the economic base theory of
regional growth presents several challenges to analysts, as evident in the North-
Tiebout debate: defining the region; deciding what in addition to exports to include
in the economic base; obtaining reasonable measurements of exports and basic
employment and income; predicting changes in the economic base; and figuring out
the specific relationship between basic and nonbasic activities. It should be stressed
that these issues do not necessarily invalidate the economic base theory nor do they
preclude the construction of useful models based on it.
8.3
Exports and Regional Growth
As posited above, the output variant of the economic base model implies that a
change in exports will elicit a proportional change in output. For example, a 10 %
increase in exports would eventually result in a 10 % increase in total regional
output, all else being equal. If this kind of stability were observed in reality, it
would lend credence to North's hypothesis that exports are the key to regional
economic growth.
The 1963, 1972, 1987, 1997, and 2007 Washington input-output studies
(Bourque and Weeks
1969
, Bourque and Conway
1977
, Chase et al.
1993
, Conway
et al.
2004
, and Beyers et al.
2010
) constitute a unique set of detailed regional
economic accounts spanning more than four decades. Among other things, these
survey-based tables provide estimates of the state's economic base over time. In this
case, the economic base is defined to include exports to the rest of the United States
and foreign countries (including expenditures by visitors to Washington) and
2
Simple economic base models are most appropriate for uncomplicated economies, such as rural
counties, where the major impact of a change in the economy stems from the induced income and
consumption effects. But the models themselves can be complex. The economic base model used
to predict the impact of shutting down the Goldendale aluminum smelter in Klickitat County,
Washington (Conway
2006
) is structured to yield one income multiplier but nine private industry
and public sector employment multipliers. The total impact is expressed in terms of employment
and labor income by industry, personal income, and population. The model consists of 156 lines of
calculations on a spreadsheet. Twenty-one lines are required to estimate basic income from eight
exporting industries, government, transfer payments, and the so-called residence adjustment (the
income of residents working outside the county less the income of non-residents working inside
the county).
