METHODOLOGY AND LIMITATIONS

METHODOLOGY: The Maine Economy: 2001 - 2004 offers a comprehensive tour of Maine's economic structure and recent structural change. Its purpose is to inform. The program utilizes employee and proprietor income to describe the relative size and absolute growth of state and county economic sectors between 2001 and 2004. The term 'economic sector' refers to a general area of product or service production. The 2001-2004 period was chosen because it includes the first and last years for which comprehensive NAICS based economic data were available for Maine at the county and state levels. NAICS is an acronym for the North American Industry Classification System. The U.S. Bureau of Economic Analysis in 2001 replaced the old economic accounting system, called the Standard Industrial Classicication System (SIC), with NAICS.

For each county and the state, five graphs present data for the 2001-2004 period. The first graph shows population change. The second graph shows the relative size of NAICS economic sectors. The third graph shows which sectors expanded and which have contracted. The fourth graph shows per-capita income. The fifith graph shows how the three components of per-capita income have changed. Each graph is accompanied by a brief interpretation. The interpretation generally gives the beginning and ending years' data value and/or a short summary of data highlights. The graph interpretations, however, are not exhausitve. Therefore, users are encouraged to expand their analyses of the graphs beyond the interpretations provided.

For graphs showing economic sector data, the data for many counties are combined into a sector called 'Other.' The Bureau of Economic Analysis (BEA) in some cases does not reveal earnings for a sector for confidentiality reasons. The value of the 'Other' sector is computed by subtracting earnings for available sectors from total sector earnings. For Maine as a whole as well as Hancock, Cumberland and York counties, the data are complete and therefore no 'Other' sector appears.

To learn more about these data, visit this BEA Regional Economic Account web site.

LIMITATIONS: The intent of this program is to show changes in economic activity at the sectoral level. Economic activity (production) at the sectoral level is best measured using value added methodologies that are captured in Gross State Product (GSP) data. GSP measures the value of sector output/production in a given year. Unfortuntely, sectoral GSP data are not available at the county level. Therefore, employee earnings and proprietors' income is used as a substitute or proxy measure. Employee earnings and proprietors' income are an important component of GSP and usually mirror changes in GSP. This means that if a sector's GSP data are increasing, employee earnings and proprietors' income usually increase. The opposite is also true.

Another limitation of this program is that it does not explain the reason(s) for economic sector change. Economic change, howerver, can be explained using mathematical economic models. A frequently used technique is input/output modeling. Input/output models describe the flow of goods and services among economic sectors and sub-sectors within a regional economy like Maine. Input/output models are used to understand and forecast the earnngs, employment, and output impacts that would occur across many sectors if activity increased or decreased in one sector.

Robert Roper, February, 2007

The Maine Economy:2001 - 2004
Copyright March, 2007. Margaret Chase Smith Policy Center, University of Maine, Orono, Maine 04469
Robert Roper, Professor of Business Administration, University of Maine at Augusta
Home | MCSPC | UMaine | UMA