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Overview of methods for regional economic analysis
Analytical questions (quantitative) The region and its sub areas (Intraregional) Levels, sources and distribution of income and employment sectoral and industrial composition of economy quality and availability of factors of production, inter-industry linkages patterns of change and how different functional units within the region compare Economic characteristics of places and interaction among them character and intensity of flows to and from suppliers and purchasers across the borders character and intensity of flows to and from final and intermediate markets, sources and destinations of income transfers, flows of factors of production and their consequences Analytical questions (qualitative) institutions, public policy tools and other administrative and organizational factors and resources patterns of change in these things potential problems and opportunities with respect to further regional development overall environment in regional sub areas national policies and their implementation major public and private institutions and their operations, infrastructure and markets through which regions interact
The region’s Interaction across its borders (interregional)
Overview of methods for regional economic analysis
Methods of intraregional regional analysis Account and employment based methods Resources based methods Settlement / location based methods Product / enterprise based methods Other
Overview of methods for regional economic analysis
Account and employment based methods
1. Income measures 2. Balance of payment 3. Mix and share analysis (location quotient) What are the levels of different types of income in different parts of the region (disaggregated product accounts) What are the regional growth dynamics in terms of import and export and the trade with the rest of the world What is the composition of the regional economy and how does it compare with that of the country and other regions. The location quotient is a device for gauging the relative specialization of the region in selected industry categories, or sectors. The most common measure is employment (related to a reference variable, usually total employment, at the regional and national levels) What is the relationship between outside demand for the products of different areas in the region and their economic expansion, based on simple multiplier relationships Economic base theory argues that economic growth of a region ultimately depends on outside demand for its products (thus exports), Export industries constitute the economic base, or basic sectors of a region, Supporting industries are called non-basic industries (where income and employment multiplication take place) Employment or income multiplication consequences of export activity. What is the overall gain in employment or income in the region associated with each gain in export sales Base multiplier: for every worker in the basic sector, there are a certain number of workers created in the non-basic sector
4. Economic base analysis
Overview of methods for regional economic analysis
Account and employment based methods
5. Input-output analysis What are inter-industry linkages and their multiplier effects Focuses mainly on the business spending component of the non-basic sector
6. Economic cluster analysis
What industries drive the development of a region and which might drive it in future Draws on the economic base theory, but with different definition: Industry clusters are agglomerations of competing and collaborating industries in a region networked into horizontal and vertical relationships, and relying on a shared formulation of specialized economic institutions. Attributes of clusters: Shared end-markets, strong buyer-supplier linkages, shared technology ad know-how Methodologies: quantitative (industry size and change, employment, wage levels), qualitative (interviews, FGD,
Overview of methods for regional economic analysis
Resources based methods
Natural resources assessment What are the natural resources endowments of different parts of the region and what are the associated problems and potentials
Product / enterprise based methods
Production linkage investigations Market centre studies What are the major types of linkages and their and their magnitude among central places in the region What are the major trade functions of the region’s market centres and how are they linked through trade to other regional market centres and the rural areas of the region Analytical categories include: 1. Overall market characterization (periodic, permanent, land area, portion paved, portion under cover, number of enterprises or stalls etc.; 2. Trade volume (both physical and and money measures) 3. Inbound trade (points of origin of goods, routes, means,cost) 4. Outbound trade 5. Buyers and sellers
Overview of methods for regional economic analysis
Settlement / location based methods
Access studies What is the degree of access of the population to functions provided by the region’s central place, and what does this suggest about effective demand for those functions Calculates a connectivity quotient based on several distance measures (distance in kilometres, time, cost, frequency etc.) What are the major factors inhibiting interaction (or opportunities for greater interaction) among central places in the region Starting point is a gravity study (that is calculation of friction ratios). Basic idea: if friction distance is zero, or where it costs nothing in time, money or anything else to travel, then there is perfect interaction… Distance can be expressed in terms of kilometres along transport routes, money or time cost of travel, red tape, or other relevant measures What volumes of selected goods flow between major points of origin and destination in the region (cities, major trading points) and to outside destinations What are the functions provided by the region’s settlement system, what sort of hierarchical networks prevail within it, and what does this suggest about effective supply of those functions
Friction analysis (gravity models)
Flow studies
Functional analysis
Overview of methods for regional economic analysis
Other
Basic statistical compendium What are the overall economic profiles of the regions’ sub areas and towns, and how do they compare with each other in terms of important characteristics
Selected methods for economic analysis
Natural Resources assessment Analytical question: What opportunities offer the region’s environmental resources? Basic principle: Natural resources are firmly rooted to specific locations, and can only be properly appreciated for regional development purposes in terms of where they are, and where they are not, located (therefore involve mapping) Suitability classification: An approach to natural resources assessment that focuses on the suitability of each major resource in each sub area for one or more specified uses. The uses considered would include major ways the resources are already being used and other uses under discussion.
Selected methods for economic analysis
Resources endowment: Economic growth and performance is tied to resources. The better endowed a region is in terms of resources, the better it should perform. Contemporary definitions see physical resources only as one part of the value of finished products in the economies. Rather, the resources include also the “aggregate concentration or mass of public, private and non-public organization’s capacity to voluntarily commit resources to economic development. Example: number of corporate headquarters, corporate wide employment, financial institutions, number of colleges and institutions, enrolment, level of personal income (Stimson, Stough, Roberts 2002: 287)
Selected methods for economic analysis
Resources potential and demand assessment Objective: Identification of potentials to satisfy local demand and export potentials through local natural (land and sea based) resources Principle: Contrast/comparison of slack local resources and insufficiently satisfied demand (matrix form)
Selected methods for economic analysis
Steps for analysing potential resources supply and demand 1. Resources supply potential List the available relevant natural resources / sector of primary production (example: irrigated rice, timber, coffee, coconut…) Estimate the current volume of production (ha/yield) Estimate the potential volume for expansion (ha/yield) Assess the potential available human resources (Number of qualified persons/households, availability (in case of seasonality) 2. Demand potential For each production sector, estimate the current volume of imports, supply deficits For each production sector, identify potential processing options / goods and services Linking supply and demand leads to the identification of possible / potential sectors for expansion of primary production / resource utilization
Selected methods for economic analysis
Example: Rice production potential in the Municipality of Espanola, Palawan (The Philippines)
Selected methods for economic analysis
Population and labour related statistics (year 2000) of the case Municipality
Total households: Total population: Population density: Working age population: Labour force: Employment rate: Underemployment rate: Employed in primary sector: Employed in agriculture: 5,360 26,801 60 persons per sqkm 10,615 persons 8,998 persons 7,211 persons 5,047 persons 2,952 2,321 based on NSO census based on NSO census National average = 246 Age 15 - 64 84.77% 80.15% 70% 58.49% 46%
Resources related statistics (year 2000) of the case Municipality
Engaged in rice production: Average cultivated area per household Average yield Local consumption 2,170 2.4 ha 0.5 tons/ha/year 1 kg/household/day 43% Total cultivated area = 5,208 ha (52.08 sqkm) 2604 tons/year 1956 tons/year
Selected methods for economic analysis
Land management units: hold information related to physical characteristics of soil, slope, internal and external drainage, elevation, and soil depth and erosion hazard. These characteristics determine the suitability of locations / areas for certain land uses or modes of production.
Selected methods for economic analysis
Land suitability: a classification of land into categories based on the degree to which the characteristics of land can satisfy the environmental requirements of a specific crop and mode of production without deterioration.
Suitability area in the case Municipality: 7,650 ha
Selected methods for economic analysis
Existing land use Currently used for rice cultivation: 5,208 ha Around 800 ha a cultivated for rice in areas not suitable (because non sustainable)
Selected methods for economic analysis
Potential for expansion of rice cultivation Potential expansion area = (suitable area) – (existing rice cultivation area) – (area with unsustainable rice cultivation) Potential expansion area = 7,650 ha - 5,208 ha - 800 ha = 1642 ha Volume of expansion = 1642 ha. x 0.5 tons = 821 tons
Selected methods for economic analysis
Resources potential matrix
Demand (potentials) Resources (potentials) Sector of primary production Current utilization Goods and services Current demand Potential for expansion Natural resource 1642 ha Volume 821 tons, plus current surplus of 650 tons Labour High underemployment rate in agricultural sector … 1,956 tons no imports, demand potentials in neighbouring provinces
Rice cultivation
5,208 ha (2,600 tons)
… … …
Selected methods for economic analysis
Functional analysis of settlements Settlement typology scheme: Characterization of the urban places in a region according to their principal economic functions. Objective: To characterize the regional settlement system in terms of dominant functions and their orders of magnitude in its central places. The simplest approach is to identify the three to five types of activities – retail, trade, crafts, manufacturing, transportation services, mining, agricultural marketing, personal services, and so on – that represent the top categories of employment in each town.
Selected methods for economic analysis
Settlement functional scalogram: Matrix, in which the urban places of the region are listed along the left in descending order of population. The array of functions found in urban places is shown along the horizontal order of the matrix.
Urban places 1 Town A Town B Town C Town D Town E Town F X X X 2 X X X X X X X X X 3 X Urban functions 4 X X X X 5 X 6 X 7 X X 8 X
Selected methods for economic analysis
Triangulated settlement function scalogram: Involves a reordering of the list of urban places in (a) descending order of number of functions and (b) frequency of appearance of functions in urban places. This suggests a rough settlement hierarchy
Urban places 2 Town A Town C Town B Town D Town E Town F X X X X X X X X X X X 4 X 1 X X Urban functions 3 X X 5 X X X 6 X 7 X 8 X
Selected methods for economic analysis
Production linkage investigation Forward linkages: Allows assessing production opportunities related to the processing of a specific resource
Boats Planks Furniture
Wood/timber
Poles
Fences Housing frames
Paper Shavings Construction boards
Selected methods for economic analysis
Backward linkages: Allows identifying the resources needed for the production of a specific good
Wood Planks Sawing equipment
Furniture
Nails
Metal
Chemical inputs Polish Containers
Selected methods for economic analysis
Related linkages: Distribution linkages, which capitalize on the region’s location in the interregional transportation network Consumer trade and public service linkages, through which the region is connected with larger consumer market and public service trade areas that extend beyond borders of the region Production linkage survey for Small and Medium Enterprises (SMEs): Businesses classified as micro, small and medium enterprises as well as the responsible entrepreneur (the person responsible for managing and assuming the risk for the enterprise).
Selected methods for economic analysis
Data checklist
Location aspects Business profile: Spatial distribution, transport access etc. Formal/informal status, membership in association, age of business, availability of business plan, employment structure, wages, net income, capitalization (assets less liabilities), technology Gender, age, educational attainment Type of raw materials, quantity, from where and how delivered, adequacy, kind of use, suppliers and prices (including the major factors determining prices) What are the specific outputs, what are they used for, how are they marketed, what are their prices, in what quantities, how and to where are they marketed
Entrepreneur profile Input to production process (backward production linkages) Outputs of production process (forward production linkages) Assistance and support
Marketing, infrastructure, policy, input supply, training/technical assistance, technology/product design