Economic Development

Question 1

Economic Base Analysis

Answer 1

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.

Question 2

Location Quotient

Answer 2

Part of Economic Base Analysis. Ratio of an industry’s share of local employment divided by its share of the nation (or other levels of government). A location quotient of less than one indicates an importing economy. If the quotient is greater than one then the area is an exporting economy.

Question 3

Shift-Share Analysis

Answer 3

This method uses employment information by sector for two points in time. For example, one may wish to compare employment by industry between 1990 and 2000. The total employment change in an industry mix between 1990 and 2000 is equal to the economic growth plus the differential shift plus the proportional shift.

Question 4

Input-Output Analysis

Answer 4

Quantitative method that links suppliers and purchasers to determine the economic output of a region. Input-output analysis is similar to economic base analysis in that it uses an economy’s structure to determine the economy in the future. Think IMPLAN

Question 5

Components of Input-Output Analysis

Answer 5

• Primary suppliers do not purchase input for production. They typically purchase only final goods;
• Intermediate suppliers sell outputs to either intermediate or final purchasers;
• Intermediate purchasers buy outputs from others and use them as inputs to produce outputs;
• Final purchasers use their inputs as final goods.
An input-output analysis is composed of three tables: transactions, direct requirements, and total requirements.

Question 6

Multiplier Effect

Answer 6

Multipliers, which measure the interdependence or linkage between industry sectors within a region, provide an estimate of the “ripple effect” due to a local change in economic activity. For example, if a new industry creates 10 new jobs directly, and there are an additional 15 jobs that are indirectly created as a result of suppliers needed for that industry

Question 7

Enterprise Zones

Answer 7

Geographic areas in which companies can qualify for a variety of subsidies. The original intent of most EZ programs was to encourage businesses to stay, locate, or expand in depressed areas and thereby help to revitalize them. EZ subsidies often include a variety of corporate income tax credits, property tax abatements, and other tax exemptions and incentives to encourage businesses to locate in low-income areas of a city or county.

Question 8

Floor Area Ratio

Answer 8

(FAR) = Building Area/Lot Area

Question 9

Economic Base Multiplier Calculation

Answer 9

EBM = Total Economic Activity/Basic Sector Activity

Question 10

Location Quotient Equation

Answer 10

LQ = (ei/e)/(Ei/E)
ei = local activity in Industry
e = total local activity
Ei = national activity in Industry
E = total national activity
Assumes base year is identical