Economic impact studies
An economic impact study (assessment or analysis) traces the total economic activity generated by a policy, investment, project, venue or activity (‘case study’) in a pre-defined impact area. This impact area is determined by the nature of the explored case study and can enhance an individual city or mu-nicipality, a region or an entire country or continent. Economic impact assessments support the decision making process in understanding the economic consequences of all kinds of relevant questions such as:
- How much income does a project or policy generate in country A?
- What portion of sales by local businesses is due to sector F?
- How many jobs in the region are supported by sector G?
- How much tax revenue will project Y generate?
- How much income do households and businesses generate in area 1?
- What will the permanent and temporary economic effects be of project Z?
The wide scope of the above mentioned questions already suggests that economic impact studies are one of the most often applied economic models. One should keep in mind, however, that economic impact studies do not include the environmental and broader social impacts such as quality of life. Hence, impact studies are only one of the tools available for both public and private decision makers.
Decisio | Economic Consulting conducted multiple economic impact analyses in the field of regional economics, recreation, tourism, foreign investments in The Netherlands, cycling etc.
Measured economic effects
Economic impact studies estimate the direct, indirect and induced effects of a proposed case study:
- Direct effects are production changes associated with the immediate effects of change in expenditures. An impulse in construction activity, for instance, leads to an increase in wages, profits, taxes paid, etc.
- Indirect effects are the production changes resulting from various rounds of respending of the receivers of the direct spending impulse in other backward-linked sectors. Architects and brick suppliers, for example, will receive orders from the construction companies responsible for the construction of the ordered development.
- Induced effects are the effects resulting from the re-expenditures of households. Employees of companies earn wages that are spend on goods and services. This means that not only the purchases of the construction companies are included, but also the expenses of the employees of the construction companies, etc.
How to measure economic impact?
Based on standard economic impact models, Decisio developed a generic economic impact model that is applicable to almost any kind of case study. In addition, our model is very transparent and easy accessible for the client and its referred audience. Our basic approach (also see Economic Impact Study Leaflet Decisio) is based on three steps:
- Step 1: Measuring the direct impact
- Step 2: Measuring the indirect and induced impact
- Step 3: Calculating the total economic impact
More information on Economic Impact Analysis?
For more information on Economic Impact Analysis, please contact Menno de Pater: 0031 – 20 – 670 05 62, or m.depater[at]decisio.nl.