ABSTRACT
For policy purposes, mathematical modeling can be used to understand and thus shape the economic development process within an ordered set of circumstances. This entry further clarifies these concepts, using as an example, procedures that are used in business-location decisions. For example, a quantitative relationship is derived among dependent variables that reflect the business-location decision at a point in time and independent variables that are believed to effect that decision in isolation or in conjunction with one another. Implicitly, economic decisions are reflections of more narrowly defined business decisions and are believed to affect economic welfare in a beneficial way. The relationships can also be described using words, graphs, or tables, with the usually preferred language and symbols of mathematics, so that policy makers and their analysts can explicitly and empirically test with secondary or primary data the relevance and robustness of the postulated mathematical model. Concepts such as the geographic domain of the variables are reviewed, and various types of mathematical models are examined for their relevance for the particular policy question addressed. One of the types of model discussed is an input–output model that relies on very specific production functions and can provide initial information about the degree of economic interaction within the area in question. Data requirements of this and similar mathematical models are intense; however, the payoff can be rewarding to the policy analyst.
