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1. 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

2. 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. 4.1

3. Events That Have Impact the Economy of Rural Areas • Employment declines in agriculture, manufacturing, and natural resource-based 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. 4.2

4. 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. • Concerns over the quality of life. • Loss of local control. 4.3

5. 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. • Helping conserve and manage the area’s natural resources. 4.4

6. 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. 4.5

7. Rest of the World Export Firms Service Firms (Input Suppliers) Local Population (Households) Service Firms (Local Population) Imports (Leakages Figure 1. Economic Activities of a Community $ G&S Good and Services $ G&S Good and Services Labor Services $ $ Labor Labor $ G&S $ G&S $ G&S $ $ 4.6

8. Figure 2. The Local Economy—Leaking Resources? 4.7

9. 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. • Multiplier—sum of direct, indirect, and induced impacts. 4.8

10. 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. 4.9

11. 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. 4.10

12. 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. 4.11

13. 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. • Improve quality of the local labor force. • Provide local and regional services that compete in price and quality. 4.12

14. Improve Ability to Capture Dollars • 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

15. 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 expanding firms. 4.14

16. 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. 4.15

17. 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. 4.16

18. Encourage Business Formation (cont.) • Be aware that adversity often stimulates entrepreneurship. • Adopt an encouraging community attitude toward new businesses. 4.17

19. 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). 4.18

20. Prepared by David Mulkey University of Florida March 2000 4.19