International Trade and Finance: A North American Perspective

By Khosrow Fatemi | Go to book overview

3
AN ECONOMIC BASE MODEL FOR MEASURING LOCAL SPECIALIZATION AND EXPORTS ORIENTATION OF A REGION: THE CASE OF ARKANSAS

JOHN S. KAMINARIDES


INTRODUCTION

The purpose of this chapter is to determine a region's product specialization and export orientation by applying the regional economic base analysis. The economic base type analysis is used to measure basic and nonbasic economic activity, which in turn is applied to develop regional employment and income multipliers, the index of local specialization (ILS), and the net export workers (NEW). The model developed in this chapter is based on contributions made to regional economic literature by Mattila and Thompson, 1 Charles M. Tiebout, 2 and Homer Hoyt. 3 In this chapter the traditional economic base analysis is expanded to develop a methodology of determining and measuring the product specialization and export orientation of a region. Since the export-import data do not reveal exports or imports by region, the model presented in this chapter may be used as an indirect approach of determining the region's export orientation.

The economic base analysis stresses the basic (primary, nonlocal) activity and the nonbasic (local, service, derivative) activity. Basic activity is the area's source of stimulus because it provides the export surplus, which generates an export income stream upon which new demand and employment is created. Basic employment is defined as that employment which leads to the production of goods or services that are exported outside the boundaries of the region under study and for which payment is received from outside the region. 4 Nonbasic employment is defined as the employment that leads to the production of goods and services that are consumed or used within the boundaries of the region. 5

This study utilized the following tools of economic base analysis to determine the regional specialization and export orientation.

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