Economic Base Model

ET = ENB + ENB

Economic Base Multiplier

r = ENB/ET, so 0 < r < 1
ENB = r(ET), and
ET = r(ET) + EB
ET – r(ET) = EB
ET(1 – r) = EB
ET = EB / (1 – r)
ET = (1 – r)-1EB

Spatial Economic Base Model

ETi = ENBi + EBi

ENBi = (rETi + wijEBj)
ETi = rETi + EBi + wijEBj
ETi - rETi = EBi + wijEBj
ETi(1-r) = EBi + wijEBj
ETi = (1/(1-r))EBi + wijEBj
ETi = (1-r)-1*[EBi + wijEBj]
Figure 1. Traditional economic base model (two regions)

Figure 2 Incorporating space into the economic base relationship

Figure 3 Economic potential by municipio
Spatial Economic Base Models

• No spatial effects

(ln)ET =  + 1(ln)EB

• Spatial lag effects

(ln)ET =  + 1(ln)EB + W(ln)ET

• Spatial error effects

(ln)ET =  + 1(ln)EB + Wu + 

• Spatial autoregressive moving average model

(ln)ET =  + 1(ln)EB + W1(ln)ET + W 2u + 

Figure 4 Traditional economic base multipliers (1998)
OLS Model

(ln)ET = 0.9753 + 0.9051(ln)EB

0.1268 0.0186
0.0000 0.0000
Adj. R2 = 0.9577 F(1,104) = 2375.44 p = 0.0000
JB = 0.0000 BP = 0.0006 I = 0.1449

Spatial Lags Model

(ln)ET = 0.3656 + 0.9066(ln)EB + 0.0667W(ln)ET

0.2804 0.0178 0.0290
0.1922 0.0000 0.0213
2
Pseudo R = 0.9602 LIK(2,103) = -142.489 p = 0.0000
BP = 0.2631 I = 0.7190
Figure 5 Spatial multiplier effects of 1000 basic sector jobs in Mérida
Figure 6 Spatial multiplier effects of 1000 basic sector jobs in Motul, Yucatán