Definition§
The Basic Industry Multiplier (BIM) is a significant concept in economic base analysis, utilized to measure the effect of basic industry employment on the overall local economy. Basic industries refer to sectors that attract income from outside the local area, creating jobs that add value directly through export of goods or services. The BIM is calculated as the ratio of the total population in a local area to the employment in these basic industries.
An increase in employment within basic industries not only brings additional income and economic activities into the local area but also stimulates the creation of local service jobs, such as telephone operators, nurses, and supermarket clerks. Moreover, if the workers in basic industries have families, additional new people may be brought to the area, further magnifying population growth and economic development.
Examples§
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Manufacturing Plant: A town with a large automobile manufacturing plant (basic industry) attracts workers from other regions. For every job within the plant, additional service jobs (e.g., retail workers, healthcare providers) are created, increasing the local population and economic activity.
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Tourism: In a coastal town, tourism serves as a basic industry by drawing visitors from outside the area. The influx of tourists supports local hospitality businesses such as restaurants and hotels, leading to more local service job creation and overall population growth.
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Tech Hub: In a city recognized for its technological industry, employment in tech firms attracts skilled labor from across the globe. The expanding tech workforce necessitates more local services like schools, public transportation, and housing, thus boosting the local economy and increasing the total population.
Frequently Asked Questions (FAQs)§
What is the purpose of the Basic Industry Multiplier?§
The BIM is used to understand the impact of basic industry employment on the overall local economy and to guide economic development efforts by identifying key industries that attract external income.
How is the Basic Industry Multiplier calculated?§
The BIM is calculated as the ratio of the total population in an area to the number of people employed in basic industries.
What are basic industries?§
Basic industries are sectors that attract income from outside the local area. Examples include manufacturing, tourism, and technology sectors.
How does employment in basic industries affect local service jobs?§
Employment in basic industries stimulates the demand for local service jobs, such as healthcare, education, and retail services, due to the increased local population and economic activity.
Can the Basic Industry Multiplier vary between different locations?§
Yes, the BIM can vary significantly between locations depending on the extent of basic industry presence and local economic conditions.
Related Terms with Definitions§
- Economic Base Analysis: A method of assessing the economic structure and growth potential of an area by distinguishing between basic (exporting) and non-basic (local-serving) industries.
- Population Multiplier: A metric that quantifies the impact of new jobs in basic industries on the local population growth.
- Multiplier Effect: The phenomenon where an initial economic input leads to a greater than proportional increase in economic activities and outcomes.
- Employment Multiplier: A measure of the total number of jobs created in the local economy as a result of adding one job in a basic industry.
Online Resources§
Suggested Books for Further Studies§
- “Regional Economics” by Roberta Capello
- “Economic Development Finance” by Karl F. Seidman
- “Principles of Economic Development” by Edward J. Blakely and Nancey Green Leigh
- “Location and Space-Economy” by Walter Isard
Fundamentals of Basic Industry Multiplier: Economics Basics Quiz§
Thank you for exploring the fundamental concepts and applications of the Basic Industry Multiplier through our insightful quiz and comprehensive guide. Keep advancing your economic knowledge!
