Economic Base Model

Abstract

AbstractOf the tools used for regional forecasting and impact analysis, economic base models are among the simplest. Derived from the North-Tiebout theory of regional economic growth, economic base models are best suited for studying and forecasting the behavior of rural economies, which typically feature uncomplicated industrial structures. Despite their simplicity, economic base models are capable of predicting employment by industry, personal income, and population. This chapter focuses on an economic base study conducted in 2000 that estimated the economic impact of shutting down the Goldendale aluminum smelter in Klickitat County, Washington. The analysis involved four steps: collect data; construct an economic base model of the county; conduct the impact analysis; and assess the forecasting error associated with the estimated impact.