Economic Base Analysis (EBA) is used to identify local industry sectors that have the ability to produce goods and or services beyond the needs or consumption of their local market. The excess production can thus be exported to other markets that have less of a competitive advantage for that particular product or service and allow money to be imported back to the local economy.

EBA relies on the economic theory that the local economic area (LEA) grows when it has firms within industry sectors that produce goods and/or services for the external export market. To begin analyzing a market’s real estate demand and to better understand that market’s comparative advantages, employment is broken into two fundamental categories: basic and non-basic employment.

Economic Base Analysis: Two-Part Process

Economic base analysis is a two-part process. The first part of the process, a snapshot of current employment, is to determine the multipliers that will be used in the second part of the process. These multipliers, economic base multiplier (EBM) and population employment ratio (PER), are calculated in the following four steps listed with current economic base. The second part of the process uses the multipliers to forecast future total employment and total population. The steps for the second part of the process are listed with future economic base.

Part 1: Current Economic Base

Step 1: Identify the industry sectors having basic employees.
Step 2: Calculate total basic employment.
Step 3: Determine total employment and calculate the EBM.
Step 4: Determine total population and calculate the PER.

Part 2: Future Economic Base

Step 1: Estimate the future basic employment.
Step 2: Multiply future basic employment by the EBM to estimate future total employment.
Step 3: Multiply future total employment by the PER to estimate future total population.