Study for the Assessment of the Sustainable Economic Development of Larnaca

The city of Larnaca conducted a study in order to identify the socioeconomic advantages and disadvantages that characterise the city. 

For purposes of illustration and discussion, two methods were used, the Export Base Analysis and Shift and Share Analysis. All information and data for the city of Larnaca was presented in diagrammatic form in order to present the differences of the local economy with the global economy of the island.

The economy of Larnaca was evaluated taking into consideration the 21 economic sectors that the Statistical Service of Cyprus recognises: 

Economic Sector

A  Agriculture, Forrestry and Fishing

B  Mining and Quarrying

C  Manufacturing

D  Electricity, Gas, Steam and Air Conditioning Supply

E  Water Supply, Sewerage, Waste Management

F  Construction

G  Wholesale and Retail Trade

H  Transportation and Storage

I  Accommodation and Food Service Activities

J  Information and Communication

K  Financial and Insurance Activities

L  Real Estate Activities

M  Professional Scientific and Technical Activities

N  Administrative and Support Service Activities

O  Public Administration and Defence

P  Education

Q  Human Health and Social Work Activities

R  Arts, Entertainment and Recreation

S  Other Service Activities

T  Activities of Households

U  Activities of Extraterritorial Organizations

 

The process focused on data analysis work from 2007-2014 with a view to creating models for Export Base Analysis or Location Quotient and Shift and Share Analysis.

The export base model allows researchers to classify an industry within the local economy according to commercial import-export activities. The "ΕΒΑ" places particular emphasis on an export economy because, in theory, the export activities are considered a key driver of the local market. For example the field J--Information and Communication Sector-- is traditionally an import sector. Also areas such as D--Electricity, Gas, Steam and Air conditioning Supplies-- and sector H --Transportation and Storage-- are traditional export sectors.

Another important part of the export base model is measurement of the export employment multiplier. The multiplier of export employment calculates job creation at local non-core sectors given the increase in employment in a key sector by one job. This variable is very important in order for the local government to combat unemployment and to correctly partition its limited resources in the export sectors. For example in the case of field C-- Manufacturing--, in 2010 nearly ten new jobs were created if a worker was employed in this export sector. The Sectors, Transportation and Storage (Transport) and D-- Electricity, Gas, Steam and Air Conditioning Supplies (energy)--are particularly important since the employment multiplier increased from 2010 to 2013. In contrast, the multiplier employment fell sharply in other export sectors. The employment multiplier is therefore important for local government because it can help to create a strategy for local economic development.

 The aim of the analysis "Shift and Share" is to indicate the relative growth rate of industries in the region compared with national trends and determine the level of industrial diversification. The two variables of interest are: "National Growth" and "Competitive Share".

The variable National Growth (NG) is used to calculate the rate of growth of a local industry compared to the overall national economy. The "Competitive Share" is the most important calculation because it is the only component that can be directly influenced by local policy makers. The calculation of the "Competitive Share" can determine if the local economy does or does not pick the market share of a particular industry compared to the national economy. After analysing these two variables, it is important to note that the two areas that showed an increasing trend in the employment multiplier are also gaining a competitive advantage. These areas are energy and transport.

To conclude, the export base and shift and share models were used to identify the strategic positioning of the economy of Larnaca. The results show an upward development in the fields of energy and transport. The local government should protect these export sectors which are collectively responsible for the flow of liquidity to the city of Larnaca. Allowing export sectors to lose their comparative advantage will lead to an increase in unemployment and a decline in local production. 

By properly strengthening the sectors of energy and transport, unemployment will be significantly reduced in the local economy since these two areas have traditionally proven to constitute the core of the economy of Larnaca.