1. Chapter 10 Cities and Urban Economies
Relation between urban growth and capitalist development
Central place theory (NOT IN TEXT)
Economic base model
Housing markets in urban areas
Gentrification processes
The development of global cities

2. A simple model of trade
Exports
Internal Goods
and Services
Imports

3. The Economic Base Model
ET = Total Employment
EX = Export Employment (Basic)
EL = Local Employment (Non-Basic)
ET = EX + EL (1)
Define a = EL/ET
Multiply by ET and substitute into (1):
ET = EX + aET
Solve for ET:
ET = ( 1/1-a)EX

4. Example, Economic Base Model
If a = .67
Then:( 1/1-.67) =( 1/.33) = 3
If EX = 500, then ET = 3 x 500 or 1500.
If EX rises to 750, ET becomes 3 x 750 or 2250
and if EX falls back to 400, ET declines to 1200

5. Alternative Formulation: Textbook p. 275
ΔT = m ΔB
Where m= 1 + NB/B
Or 1 +67/33 = 1 +2 or a multiplier of 3
If export = 500, then total impact is 1500

6. Measurement of the Economic Base Multiplier
Direct Surveys
“Short-cut” Approaches:
Assumption or Assignment
Minimum Requirements
Location Quotients
Industry Specific Models:
Input-output
Regional econometric models

7. Example of Minimum Requirements
(Thousands)
If total employment was 100,000, then minimum requirements
is 6%, or 6,000. If actual employment were 10,000, 4,000 would
be assigned to exports.
Repeat for all industries, sum local shares to obtain “a”

8. Example of Location Quotient Approach to Economic Base
Industry Jobs LQ Export Local
Agriculture
Mining
Manufacturing
Retail
Services
Total
a = 5060/6300 = .803, so (1/1-.803) = 5.08

9. Size of Region and Size of Multiplier
1.0
.67
Wn.State
Mult. = 3
World - Mult = 
Individual
Sells all labor
a = 0, multiplier = 1.0
Log Population

10. Regional Input-Output Models
Final Demand
Total Sales = Total Purchases
Total Sales = Intermediate Sales + Final Sales
Total Purchases = Intermediate Purchases + Value Added
+ Imports

11. Washington State Input-Output Model
Handouts: Transactions Table
Direct Requirements Matrix
Direct & Indirect Requirements Matrix
Direct, Indirect, & Induced Requirements
Matrix
Input-Output Notation

12. Impact Analysis Using I/O Models
Direct, Indirect
& Induced
Requirements
Matrix =
Final Demand X
Output
Employment Impacts calculated from Output Impacts

13. Impact Analysis with I/O Models
Key Inputs: Final Demand values for output, income, and jobs
Key modeling requirements: I/o model relevant to the problem
Results: usually reported for jobs, income, output, and taxes

14. Impact Analysis Examples
ArtsFund – impacts of nonprofit arts and patron spending
Technology Alliance – impact of high tech
SAM – impact of the Gauguin exhibition
Boeing Field – impact of King County International Airport
UW – impacts of Husky athletics
Seattle Center – impacts of Key Arena and of the wide variety of activities on the campus

15. Direct & Indirect Output Multipliers

16. Direct & Indirect Labor Income Per Dollar of Final Demand

17. Direct & Indirect Jobs Per $ Million Final Demand

18. Output Multipliers

19. Labor Income Multipliers – Total Labor Income /$ Direct Labor Income

20. Employment Multipliers – Total Jobs Per Direct Job

21. Regional Models, continued
Regional Econometric Models
Interregional Input-output models
Structural Change

22. Regional Econometric Models The Washington Projection & Simulation Model
Coefficient
Change
Consumption
National
Econometric
Model
Exports
Output
(I/O Relations)
Imports
State & Local
Government
Income
Employment
and
Population
Investment
Productivity Rates
Wage rates, tax rates, nonearnings income

23. WPSM Simulation of Change in Aerospace Exports

24. Multiregional Models
Region B
Region A
Region D
Region C

25. Multiregional Input-Output Model (intermediate & final transactions including interregional value added payments)
Feedback Loops

26. Simulation of Columbia Basin Irrigation Project Development
Project Region
Other Washington

27. Estimate of Employment Impacts from Multiregional Model

28. Structural Change in I/O Models
Washington State is unique in having 8 largely survey-based input-output models
They are benchmarked against 1963, 1967, 1972, 1982, 1987, 1997, 2002, and 2007
Each of these is an economic census year
The models have been aggregated to a common sectoring scheme, and transaction values have been benchmarked against the year 1972, to be able to compare their structure in constant $.

29. Output Change (1)

30. Output Change (2)

31. Gross Washington Output Level to Deliver 2007 Final Demand

32. Employment Required to Deliver 2007 Washington Final Demand

33. Share of Output Washington State

34. Composition of Exports

35. Share of Inputs Washington State