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Difference between revisions of "Economic Impact Analysis"

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Another method used for economic impact analyses are economic simulation models. These are more complex econometric and general equilibrium models. They account for everything the I/O model does, plus they forecast the impacts caused by future economic and demographic changes. One such an example is the REMI Model
 
Another method used for economic impact analyses are economic simulation models. These are more complex econometric and general equilibrium models. They account for everything the I/O model does, plus they forecast the impacts caused by future economic and demographic changes. One such an example is the REMI Model
  
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[[File:Economic Impact Analysis.png|400px|Economic Impact Analysis]]
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'''The Importance of Economic Impact Analysis'''<ref>Why is Economic Impact Analysis Important? [https://extension.umn.edu/research-communities/economic-impact-analysis University of Minnesota Extension]</ref><br />
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An economic impact analysis (EIA) helps communities understand how local economies work. An EIA will help you and your community understand questions like:
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*How important is a business or industry to your local economy?
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*What kind of investment should you make in your local economy?
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*How many jobs will be affected by a change in the economy?
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*How will a change affect the amount of money that comes to your economy?
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'''Types of Economic Impact'''<ref>Types of Economic Impact [https://www.airiodion.com/economic-impact-analysis/ AGS]</ref><br />
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The economic impact is the financial effect that an event, program, project, or policy has on an entity. That entity could be a person, a neighborhood, a city, an industry, or an entire country.
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There are typically three key types of economic impacts being analyzed when doing an economic impact study.
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*Direct Economic Impacts: Direct economic impacts would be the employment and income generated directly by a project. For example, if you were building a new distribution center in a city, you would need to hire labor, buy materials from suppliers, and contract services for technology infrastructure.
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The income that generates for the businesses and contractors you work with would be counted as a direct economic impact.
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*Indirect Economic Impacts: The indirect impacts used for an economic impact analysis would include employment and income generated through secondary sources. For example, if you’ve hired a technology firm to add an IT infrastructure to your new distribution center, the money you pay that firm is a direct impact. But when that firm buys IT hardware from a supplier to fulfill the project, the revenue the supplier generates from the purchase is considered an indirect economic impact.
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*Induced Economic Impacts: The spending that is a result of income generated from direct and indirect economic impacts is considered induced economic impacts. An example of this would be the increased spending on consumer products, entertainment, food, etc. by employees that found themselves with more disposable income as a result of getting a job due to the new distribution center project. Induced economic impacts are one of the more difficult variables to estimate when doing economic impact analysis.
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[[File:Types of Economic Impact.png|400px|Types of Economic Impact]]
  
  

Revision as of 21:06, 14 June 2022

Economic Impact Analysis is a methodology used to measure the effects of a project, policy or program on the economy. This can include factors such as jobs, income, productivity and competitiveness. EIA is often used in conjunction with other forms of analysis, such as benefit-cost analysis and financial feasibility.

Economic impact analyses usually employ one of two methods for determining impacts. The first is an input-output model (I/O model) for analyzing the regional economy. These models rely on inter-industry data to determine how effects in one industry will impact other sectors. In addition, I/O models also estimate the share of each industry's purchases that are supplied by local firms (versus those outside the study area). Based on this data, multipliers are calculated and used to estimate economic impacts. Examples of I/O models used for economic impact analyses are IMPLAN, RIMS-II, Chmura, and Emsi.

Another method used for economic impact analyses are economic simulation models. These are more complex econometric and general equilibrium models. They account for everything the I/O model does, plus they forecast the impacts caused by future economic and demographic changes. One such an example is the REMI Model


Economic Impact Analysis


The Importance of Economic Impact Analysis[1]
An economic impact analysis (EIA) helps communities understand how local economies work. An EIA will help you and your community understand questions like:

  • How important is a business or industry to your local economy?
  • What kind of investment should you make in your local economy?
  • How many jobs will be affected by a change in the economy?
  • How will a change affect the amount of money that comes to your economy?


Types of Economic Impact[2]
The economic impact is the financial effect that an event, program, project, or policy has on an entity. That entity could be a person, a neighborhood, a city, an industry, or an entire country.

There are typically three key types of economic impacts being analyzed when doing an economic impact study.

  • Direct Economic Impacts: Direct economic impacts would be the employment and income generated directly by a project. For example, if you were building a new distribution center in a city, you would need to hire labor, buy materials from suppliers, and contract services for technology infrastructure.

The income that generates for the businesses and contractors you work with would be counted as a direct economic impact.

  • Indirect Economic Impacts: The indirect impacts used for an economic impact analysis would include employment and income generated through secondary sources. For example, if you’ve hired a technology firm to add an IT infrastructure to your new distribution center, the money you pay that firm is a direct impact. But when that firm buys IT hardware from a supplier to fulfill the project, the revenue the supplier generates from the purchase is considered an indirect economic impact.
  • Induced Economic Impacts: The spending that is a result of income generated from direct and indirect economic impacts is considered induced economic impacts. An example of this would be the increased spending on consumer products, entertainment, food, etc. by employees that found themselves with more disposable income as a result of getting a job due to the new distribution center project. Induced economic impacts are one of the more difficult variables to estimate when doing economic impact analysis.


Types of Economic Impact


See Also

Direct Economic Impact
Economic Impact Assessment (EIA)
Business Impact Analysis (BIA)
Total Economic Value (TEV)


References

  1. Why is Economic Impact Analysis Important? University of Minnesota Extension
  2. Types of Economic Impact AGS