Assessing Economic Base Relationships in South Dakota
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Despite enduring criticism of both the conceptual foundation and empirical implementa-tion of economic base models, recent research has continued to investigate the validity and es-timation of such models. This paper applies economic base models to South Dakota and three of its counties in order to assess the applicability of the model and to estimate aggregated ba-sic sector multipliers and sector-specific multipliers. Time series analysis of annual, quarterly, and monthly data reveals a variety of multiplier magnitudes dependent on the particular spe-cification, data bifurcation method, and geographic unit. Distinct sector-specific multipliers are identified, including instances of dominant sectors with little influence beyond the direct basic sector change. Neither informal models of annual data nor VAR analysis of monthly data supports Granger causality from basic to nonbasic activity. In contrast to several other re-cent studies, cointegration of basic and nonbasic employment is not evident.