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Employment Multipliers (Economic Base)

(http://faculty.washington.edu/krumme/207/development/basemploy.html)


Supporting Pages:


The simple economic base (employment) multiplier is presented in three different forms, respectively emphasizing different components and roles of the multiplier Total Employment (T) = Basic Employment (B) + Nonbasic Employment (N)

Multiplier Effect (ME) = Nonbasic Employment generated (by Basic employment)
OR:
Basic employment multiplied by Nonbasic employment per basic employee
OR:
Basic Employment x Multiplier minus Basic Employment
OR:
Basic Employment x (Multiplier - 1)


Multiplier Formulation #1

T = B + N

T
B
= B+N
B

T = B (B + N)
B

T = B T
B

M1 = T
B

(Multiplier: Total employment generated per basic employee)

ME = B T
B
- B



Multiplier Formulation #2

T T
T
1 1 1

=
=
=
=
B B
T
T-N
T
T
T
- N
T
1 - N
T

1
M2 =
1 - N
T

Denominator: "leakage coefficient" (the larger this coefficient, the smaller the multiplier)
N/T = "retention coefficient" (the larger this coefficient, the larger the multiplier). This coefficient is the equivalent of the "propensity to consume locally" (pcl) x "income generated per local consumption dollar" (iclcs) in the local income multiplier.



Multiplier Formulation #3

T = B + ME

T = B + B
N
B

T = B (1 +
N
B
)

M3 = (1 +
N
B
)

[In this formulation, the emphasis is on the N/B ratio and the role of the "1" in multipliers (namely to isolate and preserve the basic component in the resulting total employment)]

ME = B
N
B




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2001 [econgeog@u.washington.edu]