“Let’s take the example of car purchases,” says Dr. Walden, a professor of agricultural and resource economics. “If you gauge the importance of the auto sales industry -- where people go to buy cars in North Carolina -- by the dollar value of the cars that are bought by North Carolinians you’d get, I think, a deceptive view of how important that industry is because, and I think most people know this, we don’t manufacture cars in North Carolina.

“So that dealer is, in essence, buying the car from out of state and bringing it here.
Yes, he’s selling it, or she, for that full price, but only a little bit of that price stays with the dealer because the dealer is going to take most of what the consumer spends and send it back to whomever he bought the car from,” Walden continues.

“So this is the difference between using the sales value of, for example, cars as a measure of economic output or using something else where we try to measure what stays in North Carolina. Economists call that value-added.

“And usually value-added is going to be somewhere between 40 and 80 percent of the sales value. And we economists think that value-added is the best measure of the impact of an industry on a particular region.”