The Neoclassical Economic Base Multiplier

Abstract

In this paper we derive an analytical expression for the regional neoclassical economic base marginal employment multiplier. The model that we adopt is a variant of the 1-2-3 general equilibrium model used in trade analysis. Its specific neoclassical characteristics are that laborsupply is a positive function of the real consumption wage and that factor and product demands are price sensitive. We calculate the employment multipliers associated with both a demand and supply stimulus to the basic sector. We demonstrate that it is possible for the marginal economic base multiplier to take any positive or negative value. However, the value of the marginalmultiplier is likely to approximate the value of the conventional average multiplier the closer production and utility functions are to Cobb-Douglas specifications and the more elastic is the labor supply function. Copyright 2000 Blackwell Publishers inc.

Export Sectors and Rural Development

“…For example, local manufacturers may grow by attracting employees away from local retailers. Ex post multipliers may be less than 1 or even negative (McVittie and Swales 1999;McGregor and McVittie 2000;Goodman 2003). This "crowding-out" hypothesis is akin to Dutch Disease and Natural Resources Curse arguments that having a larger natural resource base is inversely associated with subsequent economic growth.…”

Cost‐Benefit Analysis of Local Land Use Allocation Decisions

“…In this paper it is assumed that the multiplier effects are small enough to have no effects on market prices or land use allocation. See McGregor et al (2000) and Merrifield (1987) for more complex neoclassical economic base multiplier models.…”

Resource-Constrained Export-Base Regional Multipliers: A Northian Approach*

“…This contrasts with the results from neoclassical models where the basic and nonbasic sectors compete over the regional-specific resource. See, for example, McGregor et al (2000) and McVittie and Swales (1999). This expression reveals that expansion or contraction in the nontraded sector occurs in a linear fashion and at a rate equal to the change in the GNP, or retained regional income, generated in the traded sector. It carries the important implication that as long as one knows the initial sectoral shares within the regional economy, the effect on the regional economy of exogenous shocks to the traded sector can be analyzed by focusing solely on the impact on that sector.…”

“…The export-base model is almost invariably portrayed as wholly demand-driven and, as such, is criticized as a rather crude and limited variant of regional input-output analysis (McCann, 2000;Richardson, 1985;Romanoff, 1974). Further, where supply-side characteristics have been introduced, the analysis has, up to now, focused on the key issue raised by Tiebout of competition between the traded and nontraded sectors for scarce region-specific resources (McGregor et al 2000;McVittie and Swales, 1999: Merrifield, 1987, 1990. There has been a neglect of formal export-base modelling that reflects North's initial vision.…”