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Chapter 10 Cities and Urban Economies

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Presentation on theme: "Chapter 10 Cities and Urban Economies"— Presentation transcript:

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

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