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Sector
Planning
For: PIEP North Luzon
By: Justin Victor dela Cruz
Outline
• Rationale for Economic Planning
• Measuring the Economy
• Structuring the Economy
• Economic Analysis
Rationale for
Economic Planning
Economic Growth & Dev’t
Growth Development
An increase in the amount of Processes that seek to improve
goods and services produced per the economic well-being and
head of the population over a quality of life by creating and/or
period of time. retaining jobs and supporting or
growing incomes and the tax base.
Primarily Quantitative Both Quantitative and Qualitative
Uni-Dimensional Multi-Dimensional
Independent Inter-dependent
Economic Development
• Income Approach
National Income + (Depreciation + Taxes -
Subsidies)
• Production Approach
– Primary + Secondary + Tertiary Sector
Limitations of GDP
• Does not account for informal output
• Does not account for ecological impacts
• Does not reflect quality-of-life measures
• Does not reflect output distribution
• Does not account for population growth
Household Economics
• Income Sources
– Salaries & Wages
– Entrepreneurial Activities
– Other Sources
• Household Expenditure
• Food Threshold
– Daily food cost x 365
Structuring the
Economy
Classification of Firms
• By Employment & Capitalization
• Additional
– Quaternary Sector
– Quinary Sector
Primary Sector
• A.k.a. “Extractive Sector” or “Agriculture
Economy”
• Value derived direct from nature
• Forestry, Farming, Grazing, Hunting,
Fisheries
Secondary Sector
• A.k.a. “Manufacturing Sector” or
“Industrial Economy”
• Value-added by combining and processing
from raw materials
• Automobile assembly, Ship-building,
Textile Production, Food Processing,
Energy Utilities, Mining, Transportation,
Construction
Tertiary Sector
• A.k.a. “Service Economy”
• Value-added by selling goods from the
secondary sector
• HR-heavy
• Services for the General Public
• Accommodations, Healthcare, Finance,
Real Estate, Telecommunications, Legal
Quaternary Sector
• A.k.a. “High-tech Sector” or “Knowledge
Economy”
• Value-added by technical innovation
• Technology-heavy
• Services for the Information-Driven
• Education, Scientific Research, Biotech,
Engineering Design, BPO’s, KPO’s, I.T.,
CGI and Animation
Quinary Sector
• A.k.a. “Policy Sector”
• Value-added by high-level decision-
making
• Officials in government, universities,
healthcare, culture, think tanks
Economic
Analysis
Economic Base Model
• Basic Local Sector
– Produces surplus and exports to outside
– Creates primary employment & income
– The “Engine of Growth”
• Sufficiency
– Level of productive output of the local
economy in relation to its domestic needs
Economic Base Model
• Specialization
– Proportion of a single industry/sector of the
local economy to the entire local economy
• Concentration
– Proportion of a single industry/sector of the
local economy to the entire industry/sector
of the larger regional/national economy
Economic Base Model
• Location Quotient (LQ)
– Compares concentration of a sector/industry to the
national sector/industry
– Useful for identifying competitive advantages
– Employment, capitalization, income, expenditures or
other resources
• Calculate:
Local Employment in Industry
Total Local Employment
LQ = National Employment in Industry
Total National Employment
Economic Base Model
• Calculate (alternative):
Municipal
Airport 90% 0% 10 P200M
(P20,000,000)
IT Network
Modernization 70% 20% 2.27 P11.36M
(P5,000,000)
Gini Coefficient
• Conrado Gini
– Italian Statistician
• Uses the Lorenz Curve to
graphically represent
inequality
• Scores
0 = Perfect Equality
1 = Perfect Inequality
Gini Coefficient
A
A+B
Gini Coefficient
Country Coefficient Inequality
South Africa 62.5 High
Hong Kong 53.7 High
United States 47.0 Medium
Philippines 46.0 Medium
India 35.1 Medium
Germany 27.0 Low
Hungary 24.7 Low
Gravity Model
• Looking at the trade potential between cities and
regions.
• Similar to Newton’s Law of Gravitation
• Calculate:
V = P1 * P2
d2
V = Trade volume
P = Population of location
d = distance between locations 1 and 2
Gravity Model
V = P1 * P2
d2
City Population Distance from Trade Volume with
Davao Davao
Davao City 1,632,991 - -
Cagayan de Oro 675,950 255Km 16.98M
Kidapawan 140,195 116Km 17.01M