Presentation to the Mid-Atlantic Community Development Institute on the growth and function of local economies, the key characteristics that define and distinguish local economies, and a review of data sources for analyzing and monitoring economies.

1. Understanding Community
Economies
CDI Mid-Atlantic
July 25, 2023
Troy Mix
Associate Director, Institute for Public Administration
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2. 1 Institute for Public Administration www.ipa.udel.edu
Serving the Public Good, Shaping Tomorrow’s Leaders
The Institute for Public
Administration (IPA) is a public
service, education, and research
center within the Biden School
focused on linking the resource
capacities of the University of
Delaware to the complex needs
of governments, nonprofits, and
the business community.
Focus areas include:
• Transportation
• Regional Development +
Planning
• Education
• Organizational
Development
• Water
• Health
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3. 2 Institute for Public Administration www.ipa.udel.edu
Regional Development + Planning
at IPA
Helping governments, regional
organizations, and community groups
to shape their futures by supporting
efforts to plan for changing economic,
demographic, and development forces
– Planning Services
– Economic Development
Research and Policy Analysis
– Capacity Development
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4. 3 Institute for Public Administration www.ipa.udel.edu
My background and perspective
Small-town, rust-belt origins
Professional planner
Concern for how communities anticipate,
plan for, and adapt to changing economies
Focus on informing regional development
visioning, policy, and investment

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Goals for today
1. Learn about how local economies function and grow
– Circular flow of income
– Basic vs. non-basic industry
– Multipliers
2. Learn about key characteristics that define local and regional economies
3. Review and discuss data sources to help understand and monitor economies

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Disclaimers
Exposure, not overload, is the goal
Focus on basic concepts, techniques, and opportunities
Context and scale matters (and can limit)
– What is local/community?
– What is regional?
– What are your goals?

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Agenda
How do local economies grow?
What is your economy?
– Basic questions, data sources & techniques for fleshing out
an economic profile
Discussion: Moving toward strategy

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How do local economies grow?
Big Picture
Circular Flow of Income
Economic Base theory
Multipliers

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Economic growth, generally
Growth a function of capital and resource
availability
Growth a function of knowledge (productivity) &
technological innovation
Growth mediated by institutions
– Culture and rules of the game

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Bureau of Economic Analysis (BEA), U.S. Department of Commerce, October 2014 - Measuring
the Economy : A Primer on GDP and the National Income and Product Accounts, Public Domain,
https://commons.wikimedia.org/w/index.php?curid=36280157

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http://en.citizendium.org/wiki/File:Economics_circular_flow_cartoon.jpg

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Local economies are not sealed systems
Injections
– Investment
– Govt Spending
– Exports
Leakages
– Savings
– Taxes
– Imports

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Circular Flow of Income: Practical Implications
Effective management of a
community’s economy
involves maximizing
injections and minimizing
leakages
How?
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Leakages in Context: Retail Sales
• Leakages
– Capturing less spending than what is spent by local residents
• Some shopping inevitably happens outside local community
• Could indicate potential development opportunities
• Surpluses
– Capturing more spending than what is reasonably supported by local residents
• e.g., out-of-town shoppers
• Could be serving as a hub for shopping overall or particular niches
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Retail Sales Analysis
• The numbers are readily
available (if you pay)
– e.g., ESRI Business Analyst
• The interpretation +
strategy requires knowledge
of local context and market
opportunities +
commitment of resources

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Economic Base Theory: Primary/Basic (Traded)
vs. Secondary/Non-Basic (Local)
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Traded vs. Local
• Defining traded industries
– Is employment concentrated?
• Characteristics of traded + local:
– “Traded and local industries play different but complementary roles in the US
economy. Traded industries employ fewer people but are responsible for
almost all patents and greater average wages than local industries, whereas
local industries are generally associated with employment proportional to
regional population.”
Delgado, M., Bryden, R., & Zyontz, S. (2014). Categorization of traded and local industries in the US economy. Retrieved from
https://clustermapping.us/sites/default/files/files/page/Categorization%20of%20Traded%20and%20Local%20Industries%20in%20th
e%20US%20Economy.pdf

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Example Traded vs.
Local Sorting
https://clustermapping.us/cluster#clusters-list

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Build the base (and the rest will follow)
Contentions about growth and development
– Industries that serve export markets are a region’s economic base
– Development/expansion of the economic base drives incomes higher
– Higher incomes create demand for local services
– Incomes from service employment & entrepreneurship increase regional
demand
– Virtuous cycle continues as incomes multiply through economy

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Economic base theory in context
• Shoot anything that flies; claim anything that falls
• Economic base thinking dominates a U.S. economic development practice focused
on:
– Business recruitment and attraction
– Landing big fish
– Demonstrating impacts
• Still, tradable sectors in an economy set the tone for a place + its prospects

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An overview of economic impact analysis
When growth in a particular industry occurs, demand for
purchased inputs also increases
• Direct and indirect multiplier effects capture inter-industry purchases
• Induced multiplier effects capture household spending increases
– Based on input-output tables:

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Economic Impact Multipliers
A new business or expansion of an existing business will cause spending in the local
economy. This spending will support not only employees in the new/expanded
business, but also increase employment and economic activity in other businesses in
the area economy
Direct effects – The change (e.g., spending or employment change)
Indirect effects – New/expanded firm buys goods/services from other local firms
Induced effects – Impacts of increased household/employee spending

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Types of multipliers
Employment Multiplier
– If an employer from an industry with an employment multiplier of 1.5 brought
10 jobs to a community, 15 total jobs would be expected (10 direct, 5 indirect)
Final Demand Multiplier
– If an employer from an industry with a final demand multiplier of 12 expanded
sales/revenues by $4 million, 48 jobs would be expected to be created
Beware of suspiciously high multipliers + don’t forget about tradeoffs

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Economic base theory in the news
Study: Casinos have big economic impact
Maryland’s fast-growing casino industry injected $1.4 billion into the
state economy and supported nearly 8,000 jobs in 2013, according to
an industry-funded study released Monday.
The casino industry generated $359 million in wages and pumped
$543 million in tax revenue into state coffers, researchers at Oxford
Economics, a forecasting firm based in Oxford, England, concluded.
The analysis, paid for by the American Gaming Association, the
leading trade group representing casino operators and manufacturers,
did not include the $442 million Horseshoe Casino Baltimore, which
opened in August 2014 and employs about 3,000 people. A sixth
casino, the $925 MGM National Harbor, is being built just outside
Washington and is scheduled to open in 2016.
— The Washington Post, Regional Digest, 12/8/2014.

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100 new poultry
processing jobs
in Sussex Cty, DE

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100 new
hotel jobs in
Sussex Cty, DE

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Economic impact analysis and
multiplier cautions
• Assumes stable inter-industry purchasing patterns
• Modeled relationships may not reflect reality of local economic structure
• In a vacuum, positive impacts all but guaranteed by any economic activity
– What are you evaluating relative to? Impact analysis is not cost-benefit
• Multipliers depend on region and industry
– Sometimes development work is about changing industry relationships

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Lessons for practice
• Certain key industries tend to drive economies
• Growth occurs through expanding and developing the base
• Capturing and circulating earnings in the economy is key

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Questions to answer for your place
• How does job growth multiply through your region?
– Can imports be substituted?
– Can leaks be plugged?

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What is your economy?
• What do you make? Industries
• How do you make it and Who does it? Occupations and Demographics
• Where do you serve and draw from? Commuting
• Why does activity persist locally? Assets
• When has change happened? Trends

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What do regions
make?
Industries and
specializations

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What can help tell the story?
Absolute figures
– How many jobs per industry?
Percentages
– What share of employment in a particular industry?
Measures of relative specialization
– Location quotients and extra jobs

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Industry/employment data sources
• Economic Census - https://www.census.gov/programs-surveys/economic-census/data.html
– 5-year Census of businesses, presents employment by place of work
• County Business Patterns - https://www.census.gov/programs-surveys/cbp.html
– Annual extension of Economic Census; limited zip code data available
• Regional Economic Accounts - https://www.bea.gov/data/economic-accounts/regional
– County and MSA employment, GDP, and income, annual
• Current Employment Statistics and Quarterly Census of Employment and Wages
– https://www.bls.gov/ces/
– https://www.bls.gov/cew/

34. Institute for Public Administration www.ipa.udel.edu
Decennial Census vs.
American Community Survey (ACS)
Decennial Census
Snapshot in Time
– April 1, 2020
Count Focus
– Full population
All geographies
– Block to Nation
ACS
Period Estimate
– Monthly, 2016-2020
Characteristics Focus
– 1 in 38 HH sample
Limited geographies
– Block Group to Nation, dependent
on population size
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data.census.gov

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ACS and Economic Characteristics
Employment By Industry and Occupation – Based on where people live
– What do businesses that your residents work at “make”?
– What do workers from your place “do”?
Income and Earnings
– Total Income and Source of Earnings
Employment and Work Status
– In labor force, Employed, Unemployed
– Weekly hours worked
– For-Profit, Not-for-profit, Govt., Self-employed

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ACS and Economic Characteristics
• Commuting to Work
– Mode, Time Spent, Flow to…
• Poverty Status
• Health Insurance Coverage
• Variety of General Population, Demographic, Housing, and Social Characteristics
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Characteristics of common employment data sources
Dataset Source
Work/
Residence
Smallest
geography
Industry
specificity
Gaps
ACS
Monthly
household
survey
Residence Block group 2-digit (easily)
County
Business
Patterns
Annual
business
survey/Admin
Records
Work
County (limited
zip code data)
6-digit
Self-employed;
ag; govt.;
Suppression
Quarterly
Census of Emp
& Wages
State UI records Work County 6-digit
Suppressed
figures; non-
covered; self-
employed
BEA Regional
Data
QCEW/Admin
records
Work County 2-digit
Suppressed
figures
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Industry Classification schemes
North American Industrial Classification System (NAICS) – Nesting 6-digit code
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Classification based on “similarity of…production
processes”
• Agriculture, Forestry,
Fishing and Hunting
(NAICS 11)
– Crop and Animal
Farming
• Food Manufacturing
(NAICS 31)
– Animal slaughtering and
processing
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https://www.census.gov/naics/reference_files_tools/2022_NAICS_Manual.pdf

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Questions to answer for your region
• What is your economic base?
– Location quotient (LQ) as a basic determinant

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Questions to answer for your region
• What is your economic base?
– Location quotient (LQ) as a basic determinant

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Interpreting LQs
• > 1 = relative
specialization
• < 1 = under-
representation
• = 1 indicates
equivalent share

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How competitive is your economic base?
Shift-share analysis as a tool to assess

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Shift-share analysis interpreted
• Artificially decomposes growth
– National effect – growth that would have occurred if region grew at national
rate
– Mix effect – growth that would have occurred if all industries in region grew at
national average rates for those industries
– Shift/competitive effect – regional growth attributable to differences between
industry growth rates in region and average rates for those industries
– These effects sum to actual growth or decline

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Shift-share
example
http://shiftshare.stdb.com/
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How do you make it?
Occupations
– Again, interested in absolute figures and employment share
– Wages figure prominently
• Are these entry level? executive? high-skill requirement jobs?
Data sources
– American Community Survey – By place of residence
– Occupational Employment Statistics

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Standard Occupational
Classification (SOC codes)
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O*Net Online –
Understand Skill
Requirements

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Who makes it?
Population and demographics
– Age
– Race/Ethnicity
– Sex
– Education
Data sources - https://data.census.gov/
– U.S. Decennial Census – 100% count of basic population and housing
characteristics
– American Community Survey – Ongoing household survey of more detailed
characteristics

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Where do you serve and draw from?
Commuting
– Census Transportation Planning Package -
https://www.fhwa.dot.gov/planning/census_issues/ctpp/
– On The Map - https://onthemap.ces.census.gov/
Migration
– American Community Survey
– IRS - https://www.irs.gov/statistics/soi-tax-stats-migration-data
Foreign Trade Statistics
– State level data from the Census Bureau - https://www.census.gov/foreign-
trade/statistics/state/index.html

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OnTheMap
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Inputs to OnTheMap / Longitudinal Employer-
Household Dynamics (LEHD)
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Source: Hayward, Heath. “Local Employment Dynamics.” Center for Economic Studies, U.S. Census Bureau.

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OnTheMap
Example

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OnTheMap/LEHD Outputs
Pros
– Worker residence and workplace data
– Available at Census Block level
– Detailed view of commuting
– Age, earnings, industry breakdowns
– Map interface and frequent updates
Cons
– 2-digit level industry data
– Synthetic/Noise Infused Data
– Excludes Military, Self-Employed, Informal Employment
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Why does activity persist locally?
• What natural resources and amenities exist? What infrastructure + how costly?
• What are the strategies/characteristics of local firms?
– Hoovers, ReferenceUSA, etc.
• What innovation resources exist?
– National Center for Education Statistics - https://nces.ed.gov/collegenavigator/
– StatsAmerica Innovation Intelligence - https://www.statsamerica.org/innovation/

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Why does activity persist locally?
• How costly is labor?
• How skilled is labor (in what respects)?
• What is the cost of living (+ the quality of life)?

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When has and will change happen?
Long-run data series
– Census
– County Business Patterns
Projections (check state labor departments)
– Occupations
– Industries

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STRATEGIC QUESTIONS ABOUT YOUR PLACE
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Industries and Occupations
• What industries are over- and under-represented in your place?
• What type of work is prevalent in your place?
• Are there strengths you’d like to build on?
• Are there gaps you’d like to fill?
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Workforce and Resident Base
What are some notable characteristics of your residents?
– Education
– Age
– Income
How suitable is your resident workforce for various
opportunities?
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Economic Connections
Does the population of your place increase or decrease during working
hours?
– Would you like to see this change?
Where do people who work in your place live?
Are workers that live elsewhere a potential resource for economic
development? Are residents that work elsewhere?
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Ponder your place
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https://stocksnap.io/photo/3NITDEM0ES

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Next Steps
Let data play its basic roles:
– Answer resident, official, media questions
– Grant and funding application input
– Put your best foot forward
Identify and clarify key issues and use data to craft meaningful stories and
plans
Supplement your data and consider gathering sub-place data
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64. 63 Institute for Public Administration www.ipa.udel.edu
Troy Mix
Associate Director, Institute for Public Administration
Biden School of Public Policy & Administration
mix@udel.edu| 302-831-6191
ipa.udel.edu