Using Dummy Variables to Estimate Economic Base Multipliers

Economic base analysis is a cost-effective and accurate means of predicting employment impacts in relatively small and uncomplicated regional (community) economies. Extending previous research using the Arizona Community Data Set, this paper estimates economic base multipliers in different types of communities by introducing dummy variables into regression equations. Total employment, transfer payments, and population potential are used as explanatory variables. Manufacturing centers are shown to have larger multipliers than diversified places, mining settlements, service and trade communities, and utility towns.

Key Words:

• economic base
• multiplier
• regression
• dummy variable