Community Choices:
Public Policy Education Program
Exploring the Human Resources/Economic
Development Connection
Module Four:
Understanding the
Local Economy
8 March 2000
The Southern Rural Development Center
4.0
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.
Community Choices:
Understanding the Local
Economy
4.1
Events That Have Impact the
Economy of Rural Areas

Employment declines in agriculture,
manufacturing, and natural resourcebased 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.
Community Choices:
Understanding the Local
Economy
4.2
Why an interest in rural
development?

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.

Community Choices:

Understanding the Local
Economy
Concerns over the quality of life.
Loss of local control.
4.3
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.
Community Choices:
Understanding the Local
Economy

Helping conserve and manage the area’s
natural resources.
4.4
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.
Community Choices:
Understanding the Local
Economy
4.5
Figure 1. Economic Activities of a Community
Rest of the World
$
G&S
Good and Services
Export Firms
Labor
Services
$
$
G&S
Good and Services
Service Firms
(Input Suppliers)
$
Labor
Labor
Local Population
(Households)
$
$
Service Firms
(Local Population)
$
G&S
G&S
Imports
(Leakages
$
G&S
$
4.6
Figure 2.
The Local
Economy—
Leaking
Resources?
4.7
How Basic Industries Influence
Local Economic Development

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.
Community Choices:
Understanding the Local
Economy

Multiplier—sum of direct, indirect, and
induced impacts.
4.8
Defining Economic Development:
Some Perspectives

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.
Community Choices:
Understanding the Local
Economy
4.9
Defining Economic Development:
Some Perspectives (cont.)

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.
Community Choices:
Understanding the Local
Economy
4.10
Economic Development Alternatives
Economic development successes
are likely to be based on a mix of
activities . . .

Improve efficiency of existing firms.

Improve ability to capture dollars.

Attract new basic employers.

Encourage business formation.

Increase aid from broader government.
Community Choices:
Understanding the Local
Economy
4.11
Improve Efficiency of Existing Firms

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.
Community Choices:
Understanding the Local
Economy

Improve quality of the local labor force.

Provide local and regional services that
compete in price and quality.
4.12
Improve Ability to Capture Dollars






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)
4.13
Attract New Basic Employers

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
Community Choices:
Understanding the Local
Economy
expanding firms.
4.14
Attract New Basic Employers
(cont.)

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.
Community Choices:
Understanding the Local
Economy
4.15
Encourage Business Formation

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.
Community Choices:
Understanding the Local
Economy
4.16
Encourage Business Formation
(cont.)

Be aware that adversity often stimulates
entrepreneurship.

Adopt an encouraging community
attitude toward new businesses.
Community Choices:
Understanding the Local
Economy
4.17
Increase Aid Received from
Broader Government

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).
Community Choices:
Understanding the Local
Economy
4.18
Prepared by
David Mulkey
University of Florida
March 2000
Community Choices:
Understanding the Local
Economy
4.19