An economic impact analysis ( EIA ) examines the effects of an event on an economy in a particular region, from one environment to the rest of the world. Usually measures changes in business income, business profits, personal pay, and/or employment. The economic events analyzed may include implementation of new policies or projects, or perhaps simply business or organizational presence. Economic impact analysis is usually done when there is public concern about the potential impact of the proposed project or policy.
Economic impact analyzes typically measure or forecast changes in economic activity between two scenarios, one assuming economic events occur , and one such assumption does not occur (so-called counterfactual cases). This can be completed before or after the event ( ex ante or ex post ).
Video Economic impact analysis
Overview
An economic impact analysis attempts to measure or predict changes in economic activity in a particular region, caused by business, organizations, policies, programs, projects, activities, or other economic events. Study areas may be neighborhoods, cities, cities, regions, statistical regions, states, countries, continents, or the rest of the world.
Economic Impact Type
Economic impact analyzes often estimate the different types of impacts. The impact of output is the total increase in business sales revenue. In turn, local businesses use a portion of this new revenue to pay for goods and services outside the study area, so that the output impact is not identical to the profits of local businesses. A more conservative measure of economic activity is the value-added impact , which predicts an increase in the region's gross regional product. The gross regional product (GRP) is very similar to the country's gross domestic product (GDP), and represents the total size of the local economy. This impact estimates the increase in the wages of local employees plus the benefits of local businesses (not total income, such as output impact). However, the impact of added value can overestimate local benefits when they are transferred overseas (such as in the form of dividends or investments in foreign facilities).
A more conservative measure is the impact of labor income , which represents an increase in the total money paid to local employees in the form of salaries and wages. Increased revenue may come in the form of salary increases and/or increase of working hours for existing employees, or new jobs for the unemployed. This is a measure of economic impact only on personal income, not income or business profits. The same measure is the job impact , which measures the increase in the total number of employees in the local area. Instead of measuring the economic impact of money, this measure presents the impact on the number of jobs in the region.
Another measure of the economic impact is the effect of property values ​​, measuring the increase in total property values, and is a reflection of the income and wealth generated, both personal and business.
Economic Impact Source
In addition to the types of impacts, an economic impact analysis often estimates impact sources. Each impact can be broken down into different components, depending on the effect that caused the impact. Direct effect is the result of money initially spent in the study area by the business or organization under study. This includes the money spent on paying salaries, inventories, raw materials, and operating costs.
The immediate effect of initial spending creates additional activity in the local economy. Indirect effects are the result of a business-to-business transaction indirectly caused by direct effects. Businesses that initially benefit from immediate effects will increase spending on other local businesses. The indirect effect is a measure of the increase in this business-to-business activity (not including the initial round of spending, which is included in the direct effect).
Induced securities are the result of an increase in personal income caused by direct and indirect effects. Businesses experiencing increased revenues from direct and indirect effects will increase payroll expenses (by hiring more employees, increasing payroll hours, raising salaries, etc.). Households will, in turn, increase spending on local businesses. The induced effect is the measure of this increase in household-to-business activity. Finally, the dynamic effect is caused by a geographical shift over time in the population and business.
Methodology
The economic impact analysis typically uses one of two methods to determine the impact. The first is the input-output model (model I/O) to analyze the regional economy. These models depend on inter-industry data to determine how the effect in one industry will impact on other sectors. In addition, the I/O model also estimates the share of purchases of each industry supplied by local companies (compared to those outside the study area). Based on this data, the multiplier is taken into account and used to estimate the economic impact. Examples of I/O models used for economic impact analysis are IMPLAN, RIMS-II, and EMSI.
Another method used for economic impact analysis is an economic simulation model. This is a more complex model of econometrics and general equilibrium. They take into account all the I/O models, plus they estimate the impact caused by future economic and demographic changes. One of them is an example of REMI Model.
Comparison with Other Analysis
Analysis of related economic impacts but different from other similar studies. The economic impact analysis only covers certain types of economic activities. Some social impacts that affect the quality of life of a region, such as safety and pollution, can be analyzed as part of a social impact assessment, but not an economic impact analysis, even if the economic value of these factors can be quantified. Economic impact analysis can be undertaken as part of a broader environmental impact assessment, which is often used to examine the impact of proposed development projects. An economic impact analysis can also be done to help calculate the benefits as part of a cost-benefit analysis.
Apps
Economic impact analysis is often used in transportation planning. Common tools for this application include the Transportation Economic Development Impact System (TREDIS) and TranSight. Some transport agencies, including the Transportation Research Agency and the US Department of Transportation, publish guidelines, standards, and techniques for utilizing an economic impact analysis in a transport planning project.
Economic impact analyzes are often used to examine the consequences of projects and economic development efforts, such as real estate development, business opening and closing, and site selection projects. The analysis can also help increase community support for these projects, as well as help obtain tax grants and incentives.
Economic impact analyzes are generally developed in conjunction with proposed legislation or regulatory changes, to fully understand the impact of government action on the economy. The economic impact model of the US Department of Energy is one example of this type of application. Often an economic impact analysis is developed by a party advocating legislative or regulatory changes, to communicate the benefits of the proposed action. This can be useful with lobbying, media relations, and community outreach efforts.
Maps Economic impact analysis
See also
- Impact assessment
- Economic impacts of climate change
- Economic impact of illegal immigrants in the United States
- The economic impact of AIDS
References
Source of the article : Wikipedia
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