Importance of an industry - economic base


If I divide the total impact value added of health care industries by total region value does this give me the \"importance\" of health care to the local economy?


The answer is: not necessarily. There is a difference between \"economic base\" and the \"economy supported by an activity\". Economic base brings in money from outside the economy. A mine sells it's ore and brings in money to pay labor. That labor then buys health care. If you look at the value added impact of mining and a separate value added impact of health care there will be overlap - ie, double counting. Now, health care value added impact would disappear if the miners had to go outside of the region to get health care. Therefore; health care purchases do support a portion of the economy (as shown by value added impacts). Import substitution does count towards economic base as defined by final demand. Input-output recognizes that final demand drives the economy. Industries produce what they produce to satisfy consumption -ie, final demand. What proportion of total final demand is health care? This, to me, is a better indicator of the importance of health care to the economy.

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