Understanding Local EconomiesUnderstanding Local Economies

GoalsTo present export base theory

as a model of the way a local economy works.

To relate general export base theory to your home state and community.

To use the export base model to examine local economic development alternatives.

GoalsTo present export base theory

as a model of the way a local economy works.

To relate general export base theory to your home state and community.

To use the export base model to examine local economic development alternatives.

Events That Have Impacted Local Economies

Events That Have Impacted Local Economies

Employment declines in agriculture,

manufacturing, and natural resource-

based industries. National shift toward a service and

information-based economy. Development of new technology. Internationalization of the U.S. economy. Structural shifts within agriculture and

manufacturing.

Employment declines in agriculture,

manufacturing, and natural resource-

based industries. National shift toward a service and

information-based economy. Development of new technology. Internationalization of the U.S. economy. Structural shifts within agriculture and

manufacturing.

Lack of local job opportunities for young

people. Obsolescence of job skills among older

workers. Over-dependence on agriculture or other

single industry. Need for additional tax revenue at the

local level. Concerns over the quality of life. Loss of local control.

Lack of local job opportunities for young

people. Obsolescence of job skills among older

workers. Over-dependence on agriculture or other

single industry. Need for additional tax revenue at the

local level. Concerns over the quality of life. Loss of local control.

Why an interest in economic development?

Why an interest in economic development?

Challenges Facing CommunitiesChallenges Facing Communities

Maintaining and enhancing the

competitiveness of local businesses. Further diversifying the local economy. Easing the transition for displaced families. Providing technical and educational

assistance for local units of government. Identifying options for increasing jobs and

income. Helping conserve and manage the area’s

natural resources.

Maintaining and enhancing the

competitiveness of local businesses. Further diversifying the local economy. Easing the transition for displaced families. Providing technical and educational

assistance for local units of government. Identifying options for increasing jobs and

income. Helping conserve and manage the area’s

natural resources.

Export Base TheoryExport Base Theory

Basic Industry—Consists of those local

firms that sell goods and services

outside the local areas. Service Industry—Consists of those

firms that sell goods and services in

local markets. Includes inputs to basic

industries and goods and services to

local residents.

Basic Industry—Consists of those local

firms that sell goods and services

outside the local areas. Service Industry—Consists of those

firms that sell goods and services in

local markets. Includes inputs to basic

industries and goods and services to

local residents.

Rest of the World

Export Firms

Service Firms(Input Suppliers)

Service Firms(Local Population)

Local Population(Households)

Imports(Leakages

$ G&S

$ G&S

$ Labor

$

Labor

G&S$ G&S $ G&S

$

Good and Services

Lab

or

Ser

vice

s

$

Good and Services

$

Figure 1. Economic Activities of a Community

Figure 2. The Local

Economy—Leaking

Resources?

Direct Impacts—sales, jobs, and income

generated directly by firms producing for

non-local markets. Indirect Impacts—sales, jobs, and

income generated by firms selling goods

and services to basic industries. Induced Impacts—sales, jobs, and

income generated by spending activities

of employees in direct and indirect firms. Multiplier—sum of direct, indirect, and

induced impacts.

Direct Impacts—sales, jobs, and income

generated directly by firms producing for

non-local markets. Indirect Impacts—sales, jobs, and

income generated by firms selling goods

and services to basic industries. Induced Impacts—sales, jobs, and

income generated by spending activities

of employees in direct and indirect firms. Multiplier—sum of direct, indirect, and

induced impacts.

How Basic Industries Influence Local Economic Development

How Basic Industries Influence Local Economic Development

Growth measure in economic or

demographic terms. A particular event in a community, such

as a new shopping facility or industrial

plant. Programs to improve local services,

increase equality of opportunity, and

expand the economic based of the

community.

Growth measure in economic or

demographic terms. A particular event in a community, such

as a new shopping facility or industrial

plant. Programs to improve local services,

increase equality of opportunity, and

expand the economic based of the

community.

Defining Economic Development: Some Perspectives

Defining Economic Development: Some Perspectives

What it is, however, is a system for

meeting the needs and wants of people

in a particular geographic area over time.

The capacity to meet these needs

serves as the focus of the the economic

development process over time.

What it is, however, is a system for

meeting the needs and wants of people

in a particular geographic area over time.

The capacity to meet these needs

serves as the focus of the the economic

development process over time.

Defining Economic Development: Some Perspectives (cont.)

Defining Economic Development: Some Perspectives (cont.)

Improve efficiency of existing firms. Improve ability to capture dollars. Attract new basic employers. Encourage business formation. Increase aid from broader government.

Improve efficiency of existing firms. Improve ability to capture dollars. Attract new basic employers. Encourage business formation. Increase aid from broader government.

Economic Development AlternativesEconomic Development Alternatives

Economic development successes are likely to be based on a mix of

activities . . .

Economic development successes are likely to be based on a mix of

activities . . .

Start educational programs to improve

management skills. Start a business-industry visitation

program. Identify capital sources to encourage

business growth. Provide educational programs to keep

local businesses aware of latest R&D. Improve quality of the local labor force. Provide local and regional services that

compete in price and quality.

Start educational programs to improve

management skills. Start a business-industry visitation

program. Identify capital sources to encourage

business growth. Provide educational programs to keep

local businesses aware of latest R&D. Improve quality of the local labor force. Provide local and regional services that

compete in price and quality.

Improve Efficiency of Existing FirmsImprove Efficiency of Existing Firms

Survey consumers to assess market potentials.

Revitalize downtown shopping districts or other retail areas.

Develop training programs for local retail and service.

Encourage residents and businesses to buy locally.

Seek to combine sales/service activities with recreational events.

Organize the retail and business community (I.e. Chamber of Commerce)

Survey consumers to assess market potentials.

Revitalize downtown shopping districts or other retail areas.

Develop training programs for local retail and service.

Encourage residents and businesses to buy locally.

Seek to combine sales/service activities with recreational events.

Organize the retail and business community (I.e. Chamber of Commerce)

Improve Ability to Capture DollarsImprove Ability to Capture Dollars

Develop local industrial, office or

commercial sites; have public services

in place; provide information on local

labor supply. Develop local and regional facilities

(such as transportation, recreation,

business services, communications) Provide local tax incentives that reduce

location or operating costs of new or

expanding firms.

Develop local industrial, office or

commercial sites; have public services

in place; provide information on local

labor supply. Develop local and regional facilities

(such as transportation, recreation,

business services, communications) Provide local tax incentives that reduce

location or operating costs of new or

expanding firms.

Attract New Basic EmployersAttract New Basic Employers

Lobby for state and federal programs

and facilities that could be located in the

community. Explore non-traditional sources of

employment—retirees, recreation

resources, trade centers, bedroom

community for nearby urban centers.

Lobby for state and federal programs

and facilities that could be located in the

community. Explore non-traditional sources of

employment—retirees, recreation

resources, trade centers, bedroom

community for nearby urban centers.

Attract New Basic Employers (cont.)Attract New Basic Employers (cont.)

Form capital groups to invest private

funds locally. Provide counseling and education

assistance to those wishing to start a

new business. Study the market potential for new retail,

wholesale, service, and input-providing

businesses.

Form capital groups to invest private

funds locally. Provide counseling and education

assistance to those wishing to start a

new business. Study the market potential for new retail,

wholesale, service, and input-providing

businesses.

Encourage Business FormationEncourage Business Formation

Be aware that adversity often stimulates

entrepreneurship. Adopt an encouraging community

attitude toward new businesses.

Be aware that adversity often stimulates

entrepreneurship. Adopt an encouraging community

attitude toward new businesses.

Encourage Business Formation (cont.)

Encourage Business Formation (cont.)

Seek to ensure that assistance programs

for the elderly, handicapped, and others

are being fully tapped. Obtain aid from state and federal

governments in the form of grants for

local projects (such as water and sewer

systems, streets, parks).

Seek to ensure that assistance programs

for the elderly, handicapped, and others

are being fully tapped. Obtain aid from state and federal

governments in the form of grants for

local projects (such as water and sewer

systems, streets, parks).

Increase Aid Received from Broader Government

Increase Aid Received from Broader Government