What does economic base mean? What it means and some examples

The term “economic base” refers to businesses and other employers in a local or regional area that create a lot of jobs. We also call these industries “basic.”

They also bring in money from places far away. Most of these employers are businesses, but the government and civil service departments may also be on this list. Ottawa, the capital of Canada, and Canberra, the capital of Australia, are both based on jobs in the public sector.

When politicians and policymakers want a place to have a strong economy, they try to get businesses to move there. They encourage new businesses to move into the area and help the ones that are already there grow.
BusinessDictionary.com says this is what the term means:

“Employment agencies that focus on a particular city or community.”

Analysis of the economy

Economic base analysis is a way to figure out which industries are important to the economy of a region or city.

Economists and policymakers use economic base analyses to help them make decisions about how to develop the economy and target the workforce. In addition to GDP growth, economic development includes improvements in health, life expectancy, literacy, and access to good housing.

Robert Murray Haig (1887–1953) worked on the Regional Plan of New York in 1928, which is when he came up with the idea of economic base analysis. He was an American economist who was also known as an expert on taxation and public finance.

Economic base analysis says that activities in an area can be put into two groups: 1. Core businesses. Non-essential industries.

Key businesses

Export-oriented businesses provide the region with its most fundamental economic foundation. They’re responsible for a significant influx of foreign currency into the country. They are considered by some to be the “economic basis.”

Companies and people from outside the area use the services that basic industries offer. They bring money to the area where they live.

For example, the federal government of Canada is based in Ottawa, but it helps people all over the country.

Non-essential businesses

Basic industries are kept going by industries that aren’t as important. They don’t help businesses and people outside of their community or neighborhood.

Non-essential businesses don’t get money from outside.

Examples

The main business or economic foundation

John Doe’s Commercial Fruit Orchard grows a lot of fruit right here in the area.

Some of these fruits are bought by and eaten by locals. Most of it, though, is bought by people in other parts of the country and even from other countries.

John Doe ships to places outside of the area, which helps the local economy grow.

John Doe’s Commercial Fruit Orchard is a basic industry and part of the economic base.

Non-essential business

ACME Glistening Windows is a business that helps people clean their windows. ACME gets all of its money from people who live in the area.

It is not a basic business. It doesn’t bring money in from somewhere else. It also doesn’t do anything for people or businesses outside of itself. When used in this way, the word “goods” means “products.”

Leave a Comment