GUAM: DEVELOPMENT OF A SERVICE-ORIENTED ECONOMY

The economy of the United States Territory of Guam is dominated by a large military establishment and by tourism. The dissertation measures the economy of Guam by estimating a basic set of income and production accounts, and analyzes the peculiar economic structure which is heavily concentrated in services and lacks an industrial and agricultural base. An inadequate statistical and theoretical base existed to analyze the causes of the very rapid growth of Guam or develop long-term economic development programs. An estimate of gross domestic income and product, covering 1972 through 1976, was made to determine the structure of the economy. Data were obtained primarily from corporate and personal income tax records, commodity trade statistics, and government reports. Estimates of total production were made using the commodity-flow method which traces intersectoral goods demand. An analysis of the unusual economic structure follows. An input-output type tracing of demand flows reveals major leakages from the economy because of the import requirements of the export sectors and personal consumption. Local production is not stimulated and there are enclave tendencies in the economy. Local government acts to spread employment demand, but does not stimulate industrial activity. Four factors are isolated which affect the economic structure of the economy. The small size of the economy places major constraints on industrialization. The tourist industry is a capital intensive export sector which requires a sophisticated support apparatus, but does not stimulate the whole economy. An unbalanced trade structure makes the economy vulnerable to external disturbance and imports threaten local production. Finally, the government strongly affects the flow of demand through the economy and increases welfare through provision of services. It is concluded that an expanded linkage concept similar to a recent proposal by Hirschman that includes consumption and governmental links is appropriate to analyze the economy of small, constrained economies such as Guam. The approach can be modified, however, to focus on the role of income distribution in economic development.