Question

What are basic sector and non basic sector in economics base model?

( at least one paper)

Answer 1

The economic base theory given by John Alexander in mid-1950s tells us that the rate of economic growth of a region is determined by the amount of increase in exports from the region, meaning that through exporting more goods or preventing fewer imports can help increase economic growth of a region.

This theory is based on the notion that the region's economy is divided in to two sectors: Basic and Non- Basic sectors and all the economic activities are based on base and non-base activities. All those activities that bring money from outside of the region are called Basic activities. Whereas all other economic activities in the region are called Non-Basic activities.

Basic Sector: the basic sector is also known as export sector. Consists of firms and part of firms whose economic activity is dependent upon factors external to the local economy i.e. export markets external to the country and region. Eg. Manufacturing, Agriculture, Forestry, Fishing, Mining, National govt., hotels/lodging etc.

Non- Basic Sector: It is also known as local sector. Consists of firms and part of firms whose economic activities are

Dependent largely on local economic conditions. Eg. Retail trade, wholesale trade, local govt., services, transportation, communication, construction etc.

The economic base theory assumes that the export sector is the primary cause of local economic growth.

The theory also assumes that all local economic activities can be assigned to either the basic or non-basic sector.