4.6 Evaluating Regional Economics Using the Economic Base Multiplier and Shift-Share Analysis
Economic impact studies most of the time evaluate the regional economy changes in a selected major variable. Some examples of these variables are employment, income, or output and this is after an initial exogenous change. The thing that that economic developers are the most concerned about is how to estimate the total impact on one of the variables after a change. There is a ripple effect that is created after there is an increase or decrease in the demand for a region’s goods and services, which will effect on the economic activities past the initial external factors of the inflow of spending.
4.6.1 The economic Base Multiplier
Each economy can…show more content… pcl: The tendency to consume locally interprets how much of their income residents spend locally.
2. ipls: The tendency of income of the the local sales dollar.
We can calculate the IM as:
IM= 1/(1-(pcl * ipls)
22.214.171.124 Critics of the Economic Base Multiplier
The benefits of the economic base multiplier analysis are:
1. it shapes on a theoretically uncomplicated economic framework,
2. it does not involve much training, time, or money to be put into action using a spreadsheet software,
3. it aids in making more informed decisions about following a new economic development projects,
4. it highlights economic interdependencies, and
5. the readiness of essential data makes it an practical method that should be involved in the tool box of each economic development planner.
4.6.2 Shift-Share Analysis
The shift-share analysis relates regional economic changes for a certain time period to economic changes of a certain benchmark region. It evaluates past observed growth or decline of an industry between two distinct points in time. Shift-share analysis divides a regional industry sector’s change into three individual components:
1. national growth share (ngi): Analyzes regional economic growth in industry i with the common economic growth of the benchmark