Economic base analysis is a mainstay in economic geography and regional development. It stems from a simple theory of regional economic growth: that the growth of cities and regions is tied to their success in exporting goods and services beyond their borders.

Economic base analysis is a demand-driven theory that divides the regional economy into two sectors: a “basic” sector that fulfills demand originating from outside the region and a “nonbasic” sector that satisfies demand from within the region. The theory posits a strong and stable relationship between the basic and nonbasic sectors such that any change in the basic sector produces changes in the nonbasic sector sufficient to restore their proportional relationship. The relationship, or linkage, between the two sectors takes two forms. First, the ...