Regional Economic Impact Analysis What Is Economic Impact

Regional Economic Impact Analysis

What Is Economic Impact Analysis? • Any activity that generates payments and buys products has an effect on other parts of the economy • If those products are locally produced and payments are made locally, the effect of buying and paying them has an impact across other sectors of the local economy • Economic impact analysis measures these effects

Why Use Economic Impact Analysis? • To measure impacts of: • New industry • Business expansion, downsizing, or closure • To understand: • The role and contribution of existing industries • Local economic development planning

Structure of Local Economy with Biomass Energy Sector

Measures of Economic Activity • Output is the value of production for a given time period • Employment is the number of jobs for each industry • Value added consists of employee compensation, proprietor income, other property income, and indirect business taxes—represents the difference between purchases and sales

Input-Output (I-O) Models • I-O models are one way to conduct economic impact analysis • Used to quantify the relationships and interactions between industry sectors, households, and governments within a local economy • Constructed from a transactions table that shows the value of goods and services exchanged between different parts of the local economy in one year

Example I-O Transactions Table

What Are Multipliers? • Measure the total impact of a change in one or more industries on all other industries within the local economy

Input-Output Multipliers • Categories of multipliers – Output – Employment – Value-added • Multipliers estimate three components of total change within the local economy – Direct effects – Induced effects • Total effects = direct + induced

IMPLAN System • Software tool and database to help economists construct regional input-output models for any area of the United States