7th Week Mini Quiz

Select 3:

1. Under what conditions would you recommend using a cut-off point different from one when the location quotient is used to identify the economic base of a region? Give one specific example for which you would then identify whether the cut-off point of "1" would underestimate or overestimate the basic activities of the region.

Use of LQ for Identifying Economic Base

. 2. The regional employment multiplier would increase or decrease or be unaffected if we were to switch the region for which would calculate such a multiplier from King County to Washington State or from the Puget Sound Area to the Pacific Northwest, i.e. increase the size of the region? Why?

All other things equal, the larger region will permit an extended circulation and additional income generation of every dollar spent in the region.

[However, one could make the argument, of course, that there is a tendency that not "all things are equal". For example, one could argue that different regions contain different economic activities with employees at different earning levels. Thus, per employee, more money is likely to be spent in the local economy generating more local employment. Thus, as you aggregate economic activities and households to larger regions, it may happen that you "dilute" the larger employment multipliers of a small region with the lower multipliers of the additional areas and thereby reduce the aggregate multiplier. However, it is unlikely this effect can outweigh the "regional increase effect" for very long.]

. 3. Would you expect the "pcl" component of a local income multiplier to be larger or smaller (or be the same) in a high-per-capita income region compared with a low per-capita-income region? Why?

One can make an argument for both increasing and decreasing local income multipliers: A larger propensity to consume labor-intensive local services (landscaping, restaurants etc.) would increase the multiplier, while an increased propensity to save, travel or purchase imported luxury or "big-ticket-items" would reduce it. Thus, it becomes a matter of making a more fine-tuned argument for different kinds of high-income households or of suggesting that it comes down to an empirical determination.

Please note that the local employment multiplier (total employment per basic employee) tend to respond differently to increased income than the local income multiplier (total income per dollar of basic income), since the employment effect (additional non-basic workers generated by the total locally spent income of one basic worker) may still be substantial even if the "pcl" is relatively small (see Microsoft's local impacts e.g. in Redmond WA).

. 4. Identify and define one index or measure in network analysis. Also describe what this index measures.

Readings for this (7th) week!