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The Neoclassical Economic Base Multiplier

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  • Peter G. McGregor
  • Eric P. McVittie
  • J. Kim Swales
  • Ya Ping Yin

Abstract

In this paper we derive an analytical expression for the regional neoclassical economic base marginal employment multiplier. The model that we adopt is a variant of the 1-2-3 general equilibrium model used in trade analysis. Its specific neoclassical characteristics are that laborsupply is a positive function of the real consumption wage and that factor and product demands are price sensitive. We calculate the employment multipliers associated with both a demand and supply stimulus to the basic sector. We demonstrate that it is possible for the marginal economic base multiplier to take any positive or negative value. However, the value of the marginalmultiplier is likely to approximate the value of the conventional average multiplier the closer production and utility functions are to Cobb-Douglas specifications and the more elastic is the labor supply function. Copyright 2000 Blackwell Publishers inc.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 40 (2000)
Issue (Month): 1 ()
Pages: 1-31

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Handle: RePEc:bla:jregsc:v:40:y:2000:i:1:p:1-31

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Cited by:
  1. Price V. Fishback & Valentina Kachanovskaya, 2010. "In Search of the Multiplier for Federal Spending in the States During the Great Depression," NBER Working Papers 16561, National Bureau of Economic Research, Inc.
  2. Joseph Cullen & Price V. Fishback, 2006. "Did Big Government's Largesse Help the Locals? The Implications of WWII Spending for Local Economic Activity, 1939-1958," NBER Working Papers 12801, National Bureau of Economic Research, Inc.
  3. Kilkenny, Maureen & Partridge, Mark D., 2008. "Rural Growth and the Rural Capital Account," Proceedings: 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48145, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  4. Jean-Christophe Dissart, 2007. "Landscapes and regional development: What are the links?," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 84, pages 61-91.

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