Economic Impact Analysis – What we can do for You!

1. Economic Impact Analysis – What we can do for You! Brian Jackson, PhD EconomicsProf.com (Example studies herein are hypothetical. We keep actual client data confidential)

2. Impact Analysis by the EconomicsProf • Providing economic analysis for the state of a local economy. • Determining economic consequences of a new project or business on a local economy. • Estimating the tax effects of a new project or business.

3. Example 1: Modeling Retail Trade • A new McDonalds restaurant is set to begin operations in Hominy, OK at the beginning of 2010 • First year sales are predicted to be $1.5 Million • Find the resulting economic impacts for Osage County (home to Hominy).

4. Procedure and Data Source • Implan (IMpact analysis for PLANning) • Version 3.0 • Uses Input-Output analysis with regional specific Social Accounting Matrices and Multiplier Models • Implan database contains county, state, zip code and federal economic statistics.

5. 4 Types of Effects • Employment – How many jobs will result from the activity? • Labor Income – What is the resulting annual income to all forms of employment income? • Output – What is the value of production? • Value Added – Total output minus cost of intermediate inputs

6. Output – (some detail) • For manufacturers: Output = sales +/- change in inventory • For service sectors: production = sales • For retail and wholesale trade: Output = Gross Margin (not gross sales)

7. 3 Levels for Effects • Direct Effect – Initial production changes or expenditures made by producers or consumers as a result of an activity or policy • Example: The $1.5 Million sales for McDonalds in Hominy, OK during year 1 • Other examples: Employment, Labor Income, Value Added for the McDonalds

8. 3 Levels for Effects • Indirect Effects – The impact of local industries buying goods and services from other local industries. • Example – How are sales for other businesses in the McDonalds restaurant’s supply chain affected (in Osage County)? • Spending works backward in supply chain until money leaks from local economy thru imports or payments to value added.

9. 3 Levels for Effects • Induced Effects – Effects of change in Household income across the local economy resulting from the direct and indirect effects. • Example – How is employment in Osage County affected by the increased income of McDonalds employees and employees in the supply chain?

10. Summary Results – New Restaurant on Osage Co.

11. Results Interpretation- Employment • McDonalds restaurant will hire approximately 33.1 employees. • Osage County will increase by 1.5 new employees just to provide inputs to the restaurant. (Alas, beef comes from Argentina) • Osage County employment will increase by 1.2 as households spend more because of the restaurant.

12. Tax Results – State/Local

13. Tax Results – Federal

14. Example 2: Effects of a Pay Raise • Registered nurses with the Muskogee Regional Hospital are getting a 20% pay raise in 2010 as part of a new contract agreement with the Muskogee Regional Hospital • How does this action affect the Muskogee County economy?

15. Pay Raise to Nurses – Preliminary Inputs • Study Area: Muskogee County • Average annual income of labor group after taxes: $62,500.00/year • Number of workers affected: 115 • Average percent increase in wages: 20% • Total increase in workers’ disposable income: $62,500 x 0.20 x 115 = $1,435,500/year

16. Summary Results – Muskogee Co.

17. Pay Raise to Nurses • Since this action involves simply an increase in household income, only induced effects are relevant.

18. Example 3: Industry Sales • A new greenhouse is opening in Cherokee County, OK that expects to employ 25 people. • Find the economic impact on the area of Sequoyah, Adair, and Cherokee Counties.

19. Summary Results – Cherokee Co.

20. New Greenhouse Top 5 Sectors by Employment

21. New Greenhouse Top 5 Sectors by Labor Income

22. New Greenhouse: Tax Results – State/Local

23. Types of Activities we can Analyze • Industry Change: What is the impact of a $20MM order to Dal-Tile Co. in Muskogee? • Commodity Change: What is the impact of investments in agricultural improvements in Cherokee County? • Labor Income Change: What is the impact of a decrease in residential housing construction in Wagoner County?

24. Types of Activities we can Analyze • Household Income Change: What is the impact of a pay raise to police and fire personnel? (Note: Labor and HH Income changes are related) • Industry Spending Patterns: The county commission wants to know the effects of contracting $7 million on rebuilding county bridges. • Institution Spending Patterns: A tribal health-care facility wants to know the impact of a proposed $2.4 MM healthcare program

25. Reference * Data and much content herein was provided by resources from the Minnesota Implan Group (MIG) and it’s Implan program.