Abstract
The simple economic base multiplier is a widely used tool of regional economic analysis. Its popularity may be largely attributed to its low cost and ease of interpretation. However, recent theoretical and empirical work has cast doubt upon the use of simple economic base multipliers for short-run impact analysis. In the present study, we utilize time series techniques to test for the existence and structure of basic-nonbasic employment linkages. Our use of monthly data should allow detection of shorter lags than those observable in earlier studies which made use of quarterly and/or annual data.
Highlights
The simple economic base multiplier is a widely used tool of regional economic analysis
Time series techniques are used here to test for the linkage between basic and nonbasic employment changes at the state and SMSA levels in South Carolina
The empirical results lead to rejection of the hypothesis of short-run inde pendence of the basic and nonbasic series for both the SMSA and state levels, with more convincing results at the SMSA level
Summary
The simple economic base multiplier is a widely used tool of regional economic analysis. 363] concluded that generally there was no agreement either theoretically or empirically on the time dimension of the basic-nonbasic employment relationship In his own analysis, McNulty applied regression techniques to annual personal income estimates for SMSA's. In a study of Central Missouri Valley SMSA's, Lutrell and Gray [8] used first differences of quar terly employment data in an Almon model with zero restrictions for both endpoints, and a third degree polynomial with three lags. They reported that "with the exception of perhaps three SMSA's in the CMV,additional workers in local export occupations had only a slight impact on employment in the ur ban-oriented (nonbasic) sector of the local economy." Moriarty [10] used first differences of annual employment data for SMSA's stratified by size and geographical region. Our use of monthly data should allow detection of shorter lags than those observable in earlier studies which made use of quarterly and/or annual data
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