Employment As An Economic Indicator Essay
An increase in (E) coincides to increases in consumption(C), investment(I) and government spending(G). Export Base Theory is an economic analysis theory that breaks regional economies into two sectors, the basic and non-basic sectors. The basic sector is viewed as the engine of economic growth, converting inputs from either inside or outside the region of analysis, and turning them into outputs for sale to other economies. It is then assumed that the existence of the non-basic sector exists to serve the basic sector. In the theory, money comes into the regional economy through exports, is paid to owners of land, labor and capital whom then purchase goods and services from the non-basic sector. Money then leaves the region through outputs, such as imports of goods and services the region does not produce. Within the theory, the existence of grocery stores, gas stations, movie theaters, etc, exist to serve the employees of the basic …show more content…
Location quotients are an economic tool that can be used to assist in the identification of an export sector of an economy. The technical definition of location Quotients is as follows
〖LQ〗_s^i=(((e_s^i)/(e_s^t )))/(((e_n^i)/(e_n^t )))
LQ = Location Quotient e = Economic activity (labor in this study) i = Industry n = Nation s = Community LQs operate under the theory that not all economies can have above average employment in an economic sector. In order to have above average employment, the sector must be producing goods or services for more than its base population, providing a key signal for a basic sector. While easy to calculate, it is not to be used independently as an indicator, as regions may not have the same propensity to consume goods and services. Location quotients, combined with another indicator called trade capture area will be used in this report to identify a regions basic sectors.
Location Quotient Assumptions All economies have the same propensity to consume goods and