Uncovering Key Economic Drivers in MSMEs through Economic Base Model

Abstract

The importance of leading sectors can contribute to the development of the national economy. The economic advantages of a region serve as a mobilized tool for economic growth and are crucial in creating new business opportunities that can absorb labor. The objective of this research is to determine the leading sector for micro small and medium enterprises as well as the effects of the multiplier effect in Surakarta City in 2022. The method used Location Quotient, Base Employment, and Base Multiplier as a combination of the Economic Base Model. The findings of this study indicate that in the city of Surakarta, there are three leading sectors, namely the service sector, trade, and non-agricultural production. The highest base multiplier and base employment are in the trade sector. Both are likely to be concentrated in the southeast of Surakarta City. These findings imply that the development of leading sectors in Surakarta, such as services, trade, and non-agricultural production, should be focused on increasing efficiency and innovation, not just on increasing the number of workers. In addition, economic policy must consider that, despite the high number of workers, the economic impact may be limited if it is not accompanied by a significant multiplier effect.