Nevada’s economic upswing and subsequent tumble in the past decade is mostly the result of its small and highly concentrated economic base. A region’s economic base is determined by which of its sectors exports goods or services to other parts of the country. Tourism is a little different in that the industry brings its customers into a region to provide them with services.
Economists typically measure the sectors forming a region’s economic base by using location quotients. A location quotient provides information about whether the region has more or less of a particular industry than the national average. With the idea that people across the country generally consume similar items, industries that are present in a region above the national average are expected to export to the rest of the country. These industries have a location quotient greater than one and form the region’s economic base.