Course Introduction: Overview, Format, and Objectives
Laying a Foundation for Economic Modeling
Methods for Researching the Competitive Strengths of a Region
Workforce and Growth: Using Data to Tell Your Region's Labor Market Story
Mapping Industry Clusters, Analyzing Interdependencies, and Identifying Targets
Tools for Evaluating and Communicating Economic and Fiscal Impacts

Exercise: Estimating the Export Base and Region-wide Multiplier for a Region

Part 1: The Method, Demonstrated

First, you will first look “over the shoulder” of an economic analyst as they estimate the export base and region-wide multiplier for St. Clair County, Illinois. (Credit for this exercise goes to David Swenson, Research Professor of Economics at Iowa State University.)

(In Part 2 of this exercise, you will perform your own export base estimation and then determine the region-wide multiplier, using a similar collection of data.)

 

Examine the data to estimate the export base

Direct measures include surveying local companies or conducting a regional audit. These measures are costly, however. More commonly, economic researchers estimate the export base indirectly, by making certain assumptions about which industries are producing for export. For example, if you examine a public-data (BEA) list of the industries that comprise St. Clair County’s employers, it’s not difficult to spot those producing goods and services to be sold outside the region. (They are marked in red.)

 

Using this indirect method, we now have a list of St. Clair County’s basic industries. and can tabulate the total (estimated) basic jobs, for comparison with the total jobs (both basic-and non-basic) in the county.

Calculate the region-wide multiplier.

The formula for calculating the multiplier ratio is Total Jobs / Basic Jobs.

Applying the ratio to the export base estimate yields a multiplier of 1.66. In other words, every basic industry job yields 1.66

 

Interpret the result: What does this multiplier mean for the regional economy?
  • For every basic job, the whole St. Clair County economy (with the basic job) has 1.66 jobs.
  • If a basic firm in the county added 100 jobs, then the whole regional economy would grow by 166 jobs

 

 

Summary

A simple method for manually approximating a region-wide multiplier is to 1) estimate the export base using public data, and 2) determine the ratio of basic employment to total employment in the region.

  1. Using BEA data for a region, use your judgment to determine which industries represent the economic base–that is, to produce goods and services that will be sold beyond the region. (Alternatively, location quotients may be used, with values significantly above 1 indicating a basic industry.
  2. Calculate the multiplier ratio: Total Jobs / Basic Jobs.
Part 2: Now, Practice the Method!

Now that we’ve walked through a simple demonstration, let’s use some sample data and a provided export base estimate to determine a region-wide multiplier for the Orlando-Kissimmee-Sanford MSA in Florida. This region is the location of Walt Disney World, as well as a number of other theme parks and leisure destinations. It is also home to a number of financial and business service firms that serve customers nationwide.

In this example, the region’s basic industries have been highlighted for you. (You might have arrived at a slightly different list by applying your own judgment. (Remember, this approach is an inexact science, useful for estimating.)

 

 

Calculate the Multiplier

Using the data above, locate or calculate answers to the following questions, to determine the region-wide multiplier for the Orlando-Kissimmee-Sanford MSA. In the next module, you’ll have a chance to enter your answers into the knowledge check.

  1. What is the total employment for all industries in the region?
  2. What is the total base industry employment for the region?
  3. How many total jobs does every basic industry job add to the total regional economy (i.e., what is the region-wide multiplier?)