1. 4.0 Understanding the Local Economy Exploring the Human Resources/Economic Development Connection Community Choices: Public Policy Education Program 8 March 2000 The Southern Rural Development Center Module Four:

2. Community Choices: Understanding the Local Economy Objectives To present export base theory as a model of the way a local economy works. To relate general export base theory to your home state and community. To use the export base model to examine local economic development alternatives. To present export base theory as a model of the way a local economy works. To relate general export base theory to your home state and community. To use the export base model to examine local economic development alternatives. 4.1

3. Community Choices: Understanding the Local Economy Events That Have Impact the Economy of Rural Areas Employment declines in agriculture, manufacturing, and natural resource- based industries. National shift toward a service and information-based economy. Development of new technology. Internationalization of the U.S. economy. Structural shifts within agriculture and manufacturing. Employment declines in agriculture, manufacturing, and natural resource- based industries. National shift toward a service and information-based economy. Development of new technology. Internationalization of the U.S. economy. Structural shifts within agriculture and manufacturing. 4.2

4. Community Choices: Understanding the Local Economy Lack of local job opportunities for young people. Obsolescence of job skills among older workers. Over-dependence on agriculture or other single industry. Need for additional tax revenue at the local level. Concerns over the quality of life. Loss of local control. Lack of local job opportunities for young people. Obsolescence of job skills among older workers. Over-dependence on agriculture or other single industry. Need for additional tax revenue at the local level. Concerns over the quality of life. Loss of local control. 4.3 Why an interest in rural development?

5. Community Choices: Understanding the Local Economy Challenges Facing Rural Areas Maintaining and enhancing the competitiveness of farms and rural businesses. Further diversifying the rural economy. Easing the transition for farm families. Providing technical and educational assistance for local units of government. Identifying options for increasing jobs and income. Helping conserve and manage the area’s natural resources. Maintaining and enhancing the competitiveness of farms and rural businesses. Further diversifying the rural economy. Easing the transition for farm families. Providing technical and educational assistance for local units of government. Identifying options for increasing jobs and income. Helping conserve and manage the area’s natural resources. 4.4

6. Community Choices: Understanding the Local Economy Export Base Theory Basic Industry—Consists of those local firms that sell goods and services outside the local areas. Service Industry—Consists of those firms that sell goods and services in local markets. Includes inputs to basic industries and goods and services to local residents. Basic Industry—Consists of those local firms that sell goods and services outside the local areas. Service Industry—Consists of those firms that sell goods and services in local markets. Includes inputs to basic industries and goods and services to local residents. 4.5

7. 4.6 Rest of the WorldExport FirmsService Firms (Input Suppliers) Service Firms (Local Population) Local Population (Households) Imports (Leakages $ G&S $ $Labor $ G&S $ $ $ Good and Services Labor Services $ Good and Services $ Figure 1. Economic Activities of a Community

8. 4.7 Figure 2. The Local Economy— Leaking Resources?

9. Community Choices: Understanding the Local Economy Direct Impacts—sales, jobs, and income generated directly by firms producing for non-local markets. Indirect Impacts—sales, jobs, and income generated by firms selling goods and services to basic industries. Induced Impacts—sales, jobs, and income generated by spending activities of employees in direct and indirect firms. Multiplier—sum of direct, indirect, and induced impacts. Direct Impacts—sales, jobs, and income generated directly by firms producing for non-local markets. Indirect Impacts—sales, jobs, and income generated by firms selling goods and services to basic industries. Induced Impacts—sales, jobs, and income generated by spending activities of employees in direct and indirect firms. Multiplier—sum of direct, indirect, and induced impacts. 4.8 How Basic Industries Influence Local Economic Development

10. Community Choices: Understanding the Local Economy Growth measure in economic or demographic terms. A particular event in a community, such as a new shopping facility or industrial plant. Programs to improve local services, increase equality of opportunity, and expand the economic based of the community. Growth measure in economic or demographic terms. A particular event in a community, such as a new shopping facility or industrial plant. Programs to improve local services, increase equality of opportunity, and expand the economic based of the community. 4.9 Defining Economic Development: Some Perspectives

11. Community Choices: Understanding the Local Economy What it is, however, is a system for meeting the needs and wants of people in a particular geographic area over time. The capacity to meet these needs serves as the focus of the the economic development process over time. 4.10 Defining Economic Development: Some Perspectives (cont.)

12. Community Choices: Understanding the Local Economy Improve efficiency of existing firms. Improve ability to capture dollars. Attract new basic employers. Encourage business formation. Increase aid from broader government. Improve efficiency of existing firms. Improve ability to capture dollars. Attract new basic employers. Encourage business formation. Increase aid from broader government. 4.11 Economic Development Alternatives Economic development successes are likely to be based on a mix of activities...

13. Community Choices: Understanding the Local Economy Start educational programs to improve management skills. Start a business-industry visitation program. Identify capital sources to encourage business growth. Provide educational programs to keep local businesses aware of latest R&D. Improve quality of the local labor force. Provide local and regional services that compete in price and quality. Start educational programs to improve management skills. Start a business-industry visitation program. Identify capital sources to encourage business growth. Provide educational programs to keep local businesses aware of latest R&D. Improve quality of the local labor force. Provide local and regional services that compete in price and quality. 4.12 Improve Efficiency of Existing Firms

14. Community Choices: Understanding the Local Economy Survey consumers to assess market potentials. Revitalize downtown shopping districts or other retail areas. Develop training programs for local retail and service. Encourage residents and businesses to buy locally. Seek to combine sales/service activities with recreational events. Organize the retail and business community (I.e. Chamber of Commerce) Survey consumers to assess market potentials. Revitalize downtown shopping districts or other retail areas. Develop training programs for local retail and service. Encourage residents and businesses to buy locally. Seek to combine sales/service activities with recreational events. Organize the retail and business community (I.e. Chamber of Commerce) 4.13 Improve Ability to Capture Dollars

15. Community Choices: Understanding the Local Economy Develop local industrial, office or commercial sites; have public services in place; provide information on local labor supply. Develop local and regional facilities (such as transportation, recreation, business services, communications) Provide local tax incentives that reduce location or operating costs of new or expanding firms. Develop local industrial, office or commercial sites; have public services in place; provide information on local labor supply. Develop local and regional facilities (such as transportation, recreation, business services, communications) Provide local tax incentives that reduce location or operating costs of new or expanding firms. 4.14 Attract New Basic Employers

16. Community Choices: Understanding the Local Economy Lobby for state and federal programs and facilities that could be located in the community. Explore non-traditional sources of employment—retirees, recreation resources, trade centers, bedroom community for nearby urban centers. Lobby for state and federal programs and facilities that could be located in the community. Explore non-traditional sources of employment—retirees, recreation resources, trade centers, bedroom community for nearby urban centers. 4.15 Attract New Basic Employers (cont.)

17. Community Choices: Understanding the Local Economy Form capital groups to invest private funds locally. Provide counseling and education assistance to those wishing to start a new business. Study the market potential for new retail, wholesale, service, and input-providing businesses. Form capital groups to invest private funds locally. Provide counseling and education assistance to those wishing to start a new business. Study the market potential for new retail, wholesale, service, and input-providing businesses. 4.16 Encourage Business Formation

18. Community Choices: Understanding the Local Economy Be aware that adversity often stimulates entrepreneurship. Adopt an encouraging community attitude toward new businesses. Be aware that adversity often stimulates entrepreneurship. Adopt an encouraging community attitude toward new businesses. 4.17 Encourage Business Formation (cont.)

19. Community Choices: Understanding the Local Economy Seek to ensure that assistance programs for the elderly, handicapped, and others are being fully tapped. Obtain aid from state and federal governments in the form of grants for local projects (such as water and sewer systems, streets, parks). Seek to ensure that assistance programs for the elderly, handicapped, and others are being fully tapped. Obtain aid from state and federal governments in the form of grants for local projects (such as water and sewer systems, streets, parks). 4.18 Increase Aid Received from Broader Government

20. Community Choices: Understanding the Local Economy 4.19 Prepared by David Mulkey University of Florida March 2000