Community Economics: Data Analysis

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Community Economics Data Analysis

• Mechanism to Stimulate Discussion
• Challenges Local Perceptions
• Identifies Strengths
• Identifies Weaknesses
• Identifies Threats
• Identifies Opportunities
• In the end, helps you understand what is
  happening locally..

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Community Economics Data Analysis
Issues to Consider

• Looking for Patterns
• Looking for Comparisons
• Looking for Challenges Surprises
• Looking over Time
• Looking for Insights, Not Precision
• Many Sources Formal and Informal

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Community Economics Data Analysis

Traditional Measures
Alternative Measures

• Retail Sales

• Employment

• Income

• Property Values

• Unemployment

• Income Distribution

? Population

• Social Indicators
• Crime Rates
• Drop Out Rates

? Number of Firms
? Migration
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Community Economics Data Analysis

Analyzing the Data One thing to keep in mind is
that we're generally trying to determine where
the community is now. Thus, you want information
about what the local economy is currently doing,
who is currently doing it, and its capacity to do
what it is doing.
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Community Economics Data Analysis
A Sampling of Specific Tools

Growth Indices  Location Quotients  Population
Employment Ratio  Trade Area Analysis
Thresholds Export Base Multipliers Spatial
Analysis Tools
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Community Economics Data Analysis
Growth Indices
Measuret1,i Growth Index t1,i
Measuret0,i    Measurei
Population, Employment, Income or Other
Variable   t refers to the
year   i refers to the variable
of interest  The numerical change in the index
from one year to the next is the growth
rate  Changes over time indicate general growth
patterns and levels of stability

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Community Economics Data Analysis

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Community Economics Data Analysis

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Community Economics Data Analysis
Location Quotients of local employment in
sector i LQ
national employment in sector
i    Critical Values  LQ lt 1 Underspecialized,
potential for expansion?  LQ 1 As expected  LQ
gt 1 Overspecialized, driver of local
economy   Comparison to similar places

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Community Economics Data Analysis
Location
Quotients  
Platteville Wisconsin BUILDNG
MTRLS/HRDWARE/ETC 59 23,887 GEN
MERCHANDISE STORES 351
61,328 FOOD STORES
200 66,068 AUTO
DEALERS/SVC STATIONS 122
55,268 APPAREL/ACCESSORY STORES
31 20,265 HOME FURNISHING STORES
27 18,976
EATING DRINKING PLACES 436
173,449 MISC RETAIL STORES
74 111,977 total
employment
8,346 3,075,142   LQFood Stores
(200/8,346) / (66,068/3,075,142)
(.0239)/(.0215) 1.115

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Community Economics Data Analysis

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Community Economics Data Analysis
PopulationEmployment Ratios

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Community Economics Data Analysis

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Community Economics Data Analysis

Data for an example community   1,000,000
actual retail sales for eating and
drinking establishments, 750 state per
capita sales for eating and drinking
establishments, 7,500 community per capita
income, 10,000 state per capita income.
2,000 community population .75 Index of
Income (7,500 / 10,000)
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Community Economics Data Analysis
  The trade area captured for this hypothetical
community is   Actual Sale Trade Area
Captured
State Per Capita Sales Index of Income  or

Trade Area Captured 1,000,000
1,778
750 (7,500 /
10,000)   In this example, the community's
eating and drinking establishment market is
supporting 1,778 full-time customer equivalents.

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Community Economics Data Analysis

To compute the pull factor, simply divide the
community's trade area captured by the
community's population. Or   Pull Factor
Trade Area Captured 1,778 0.889
Community Population
2,000   For this community, trade area
captured is less than the community's population,
hence the pull factor is less than one, or the
restaurant market in this community is loosing
customers to surrounding markets.
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Community Economics Data Analysis
To calculate potential sales, no additional
information is required. Potential sales is
estimated by the formula Potential Sales
State Per Capita Sales x Community Population
x Index of Income or,
for this example community   Potential Sales
750 2,000 (7,500 / 10,000) 1,125,000

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Community Economics Data Analysis
The community's sales surplus or leakage for the
restaurant market is calculated by comparing
potential sales to actual sales.  
Surplus (Leakage) Actual Sales - Potential
Sales
1,000,000 - 1,125,000
-125,000   Because potential
sales are greater than actual sales in this
example, this community is said to have a
125,000 leakage in this retail market. In other
words, the dollar value of the pull factor being
less than one is approximately 125,000.

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Community Economics Data Analysis

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Community Economics Data Analysis

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Community Economics Data Analysis

Market threshold is a simple measure of the
market size required to support a given number of
different types of firms. Market demand is
influenced by many factors including local income
and demographic characteristics. Perhaps the
simplest characteristic is market
population. The other important consideration is
the cost structure of the firm itself.
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Community Economics Data Analysis

In the end, when you look at secondary data you
should believe it all and trust none of it.
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Community Economics Data Analysis

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Community Economics Data Analysis
External markets - Export base theory

Export base theory argues that the community's
economy can be divided into two sectors (North
1955 1956 Tiebout 1956a 1956b). The first
sector is the export or basic sector. The export
sector consists of that portion of the
communitys goods and services market that trades
with other areas. The export sector brings
dollars into the community because someone
outside the community purchases goods and
services produced in the community. The second
sector, termed the non-export, non-basic, or
residentiary sector sells its product within the
boundaries of the community (internal markets)
and exists to support the export sector.
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Community Economics Data Analysis
External markets - Export base theory

Export base theory contends the development of a
community depends on the vigor of its export or
basic industries. The critical force in the
community's economic development is external
demand, not the community's ability to supply
capital and labor or use technology. The timing
and pace of the community's economic development
depends upon the success of its export sector,
the characteristics of the export sector, and the
disposition of income received from export sales.
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Community Economics Data Analysis
It is a fairly simple theory claiming that the
local economy can be divided into two parts
basic and non-basic. Total Basic
Non-basic or Et Eb Enb The non-export
base (Enb) component of the local economy (Et) is
generally larger than the export sector (En) but
is dependent on the export sector. Thus, the
export base model argues that any change in the
export base leads to some multiple change in the
total local economy. Specifically, the change in
the export sector has a feedback or multiplier
impact on the non-basic sector.

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Community Economics Data Analysis

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Community Economics Data Analysis

Et Eb Enb EnbrEt Et Eb rEt Et rEt
Eb Et(1-r) Eb Et 1/(1-r) Eb
Export-base multiplier
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Community Economics Data Analysis

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Community Economics Data Analysis

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Community Economics Data Analysis

Applebaum or direct customer survey
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Community Economics Data Analysis

Applebaum or direct customer survey
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Community Economics Data Analysis

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Community Economics Data Analysis

Gravity Models I is the expected interaction
between places i and j or the influence of place
j on place i. Ai and Aj represent the size (mass)
of the places i and j. Dij represents the
distance between places i and j. K is a constant
and reflects any barriers to trade or
interaction. Exponents a, b, and c are estimated
parameters for the gravity model and vary with
the type of economic activity being considered.
For example, c is a measure of the disutility or
cost of distance to perform the economic
activity. In other words, c is a measure of
distance decay. The general value of c is two,
but it will vary depending upon the specific
activity.
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Community Economics Data Analysis

Reilly's Law of Retail Gravitation derives from
the gravity model and is used to identify market
boundaries (Reilly, 1931). Reilly's Law states
that customers living at any point between two
markets (i and j) will be attracted to the market
in accordance with the relative drawing power of
the two markets (Ai/Aj), and inversely with the
square of the relative distance of the point from
the two markets (Dj/Di)2 . This presumes people
will shop only in the town with the greatest
attraction and customers will not cross market
boundaries.
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Community Economics Data Analysis

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Community Economics Data Analysis