Economic-base theory and highly-open economies: incorporating day-to- day mobility

Territories (regions, cities, districts…) are considered today to play an important role in economic activities and growth. There is therefore an increasing need for local-level tools to support effective territorial policies. Economic-base theory is a conventional theoretical framework used to describe the main short-term factors of economic development in highly-open economies. While in the mainstream application of this theory only export activities are considered to be basic, in that they generate external income, the literature highlights the importance of day-today mobility, the so-called "residential" economy and the "in-place" or "presential" economy, for the development of these kind of economies. This raises questions about two assumptions of traditional economic-base theory: that individuals may use a non-marginal fraction of their income to buy consumer goods and services outside their place of residence; and that the income of an area's residents may differ from income produced in that area. This paper seeks to explore the theoretical implications of these two fundamental characteristics of highly-open economies. 2