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Regional Impact Modeling Michael Hicks

Regional Impact Modeling Michael Hicks. You can have a new firm or activity that generates regional impact, without relevant economic development and at a time of negative economic growth. Regional Impact ≠ ED or Growth.

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Regional Impact Modeling Michael Hicks

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  1. Regional Impact Modeling Michael Hicks

  2. You can have a new firm or activity that generates regional impact, without relevant economic development and at a time of negative economic growth. Regional Impact ≠ ED or Growth

  3. Technological progress– ubiquitous technological change, university and private R&D, and the ability to capture the benefits in-state Private Capital – investment by business and residents Public Capital – the quality of public goods and services, such as highways, etc. Human Capital – the quality of a labor force (health, education, training and culture). Unexplained factors – perhaps 1/3rd of growth forces Economic Growth is caused by:

  4. Regional Growth Growth in a county i, in year t, is a function of technological progress (A), physical capital (both public and private), K, human capital (H) and ‘unexplained variation’ or e.

  5. A process by which communities attract, retain and reinvest wealth to improve the quality of life. -David Dodson Economic Development

  6. Economic Impact The effect on production, employment, earnings and tax revenues associated with the opening, closing, expansion or contraction of a business, government or other economic activity on a specified region.

  7. Historical study • Case Study • Economic Model How to Measure?

  8. Long history of use and interpretation • Relatively easy to use & low cost • Well received by policymakers • Easy to explain to media and stakeholders • Adaptable to industry and geography Economic Model: Input-Output

  9. New Firm Builds Facility How Input-Output Works Buys equipment leakages Buys services The size of the impact depends on the size of investment, wages, etc., and the share of leakages (geography and industry). Hires workers Pays taxes Impacts

  10. How it works in Practice • Data collected and calibrated since 1942 • Multiple sources of model adaptions • Modeler needs information on industry, investment/employment • Model is wrong, but typically very useful

  11. What Does Impact Tell You?(first order issues) • The impacts from a particular firm, in a particular industry • The tax effects (for a B/C analysis or TIF proposal) • Employment Impacts (DWD, B/C, etc.)

  12. Differential impacts by firm/industry • Insight into negative effects of residential leakages • Importance of Quality of Place & Education • Fiscal considerations at local level • Level of likely reinvestment (commercial & residential) • Importance of overall region to ED success • Differentiates role for community (commerce, bedroom, etc.) What Does Impact Tell You?(second order issues)

  13. Data is 2-3 years old • Site specific taxes need watching • No labor supply constraints Limitations

  14. Impact modeling is a tool for ED work • Aids in specifics of ED effort (TIF justification) • Critical tool for strategic thinking about economic and community development Summary

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