Geoscience Reference
In-Depth Information
Table 8.1
Washington
output, exports, and
imports (billions of dollars)
1963 1972 1987 1997 2007
Total output 12.5 26.0 133.3 274.4 603.7
Total exports 4.9 10.8 53.0 111.7 246.7
Percent of output 39.2 41.5 39.8 40.7 40.9
Total imports 4.6 9.8 48.1 114.5 277.6
Percent of output 36.8 37.7 36.1 41.7 46.0
Note
: Total exports include industry sales to the federal government.
Total imports include imports by households, the investment sector,
and state and local government
Source
: Washington input-output tables
federal government expenditures. Like exports, federal expenditures result in
money flowing into the state economy. This in turn leads to additional rounds of
spending—the multiplier process—and the creation of jobs in the nonbasic sector.
Examples of federal basic activities in Washington include the operation of a navy
port, the administration of public forest lands, and interstate highway construction.
The input-output tables provide strong empirical support for the economic base
theory of regional growth (Table
8.1
). Indeed, the tables reveal a remarkably stable
relationship between Washington exports (U.S. exports, foreign exports, and fed-
eral expenditures) and total output (the value of production in all industries).
Between 1963 and 2007, exports and output in current dollars grew at almost
identical annual rates, 9.3 and 9.2 %, respectively. Consequently, the export-output
ratio never strayed far from 0.4. This implied that the non-basic output-total output
ratio (r in the above economic base model) stayed around 0.6 and that
the
Washington aggregate output multiplier remained close to 2.5 (
¼
1/[1.0-0.6]) for
nearly 50 years.
The constancy of the export-output ratio is a little surprising in light of the fact
that the input-output measurements were taken at quite different points in the
business cycle. In 1972, the state economy was limping along, trying to recover
from the Boeing Bust, the worst recession since the Great Depression. In 2007, due
to the housing bubble, the economy was enjoying its best year of the decade.
The stability of the Washington export-output ratio is not only consistent with
the fundamental principles underlying the economic base model but it also gives the
model predictive power. In 1963, for example, if one had known the export-output
ratio and had an accurate forecast of exports in 2007, it would have been possible to
predict total output in 2007 with very little error (specifically, 4.2 %). Given a
projection of labor productivity (output per worker), one could have also made a
quite reasonable forecast of employment.
While the input-output data support the economic base theory of growth, they
provide no evidence of import substitution. As noted previously, Tiebout saw
import substitution as a second possible way for a regional economy to develop.
In effect, import substitution would enhance the nonbasic sector of the economy,
thereby increasing the regional output and employment multipliers. This would
enable the regional economy to grow without expanding the economic base.
