Measuring the Impact of Tourism on Rural Development: An Econometric Approach

Research on economic base analysis has consistently favored approaches that measure the level of basic employment in all sectors rather than simply assuming that certain sectors (such as manufacturing) are inherently basic. Measurement of economic base in these studies, however, has often used techniques that have a tendency to be imprecise, either underestimating (location quotients) or overestimating (minimum requirements) basic employment. Such techniques are necessary since it is often difficult to identify approaches (other than costly surveys) to identify the level of basic activity in each sector. In this research, I propose an econometric approach to estimate the level of basic employment in a key service industry (lodging) with substantial potential to be part of a region’s economic base. The model is run for counties in the State of Nebraska, a state where tourism is not a large part of the economy, and, therefore, standard techniques such as location quotients are unlikely to identify basic employment. The econometric approach was able to isolate the level of basic tourism activity in the each Nebraska county. However, further analysis did not consistently identify a statistically significant relationship between basic tourism activity and total employment in Nebraska counties.