Economic Impact
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Economic Impact
Economic impact is defined as a macroeconomic effect on commerce, employment, or incomes produced by a decision, event, or policy (BusinessDictionary). This impact is determined through an economic impact analysis and can be done on something as small as a neighborhood or as large as the entire world. It is measured in terms of economic growth and the linked changes in employment and wages (Wikipedia). Economic impact analyses usually measure the amount of economic activity at a particular time during a specific activity and determines what the difference would be if that activity never occurred. The economic impact analysis can be conducted when there is public concern about potential economic impacts of a proposed project or policy (Wikipedia).
There are many different methods used when determining economic impact. At the very least, economic impact analyses guesstimate average per-person spending and then multiply this by the sum of users to establish the direct spending associated with the area or activity under investigation. The management team then applies multipliers to estimate secondary or indirect economic effects (TheFreeLibrary). Some studies use the IMPLAN system, which is a computer based package that includes data, software, and a USB storage drive that provides economic resolution from the national level all the way down to a specific zip code. It is currently used by government agencies, colleges and universities and corporations all over the world. People who use this system can quickly and efficiently model any economic impact (Alward, 2010).
Another method used in estimating economic impact is using the Regional Industrial Multiplier System. It measures the economic impact of an industry by accounting for three elements of potential economic impacts: direct, indirect, and induced impacts. Regional Industrial Multiplier Systems multipliers are supposed to indicate the total regional effects on industrial output, personal earning, and employment for any county or group of adjacent counties in the United States resulting from any industry activity (Bureau of Economic Analysis). These multipliers are given in three tables: total output, earnings, and employment.
The REMI model is also used to answer all the “what if” questions about the economy. The models are dynamic and incorporate changes over time allowing firms and individuals to change their behavior in response to changing economic conditions (REMI). Each REMI model is made to order for detailed geographic regions by using data; including employment, demographic, and industry data, unique to the region in question. The REMI simulation model uses a wide variety of equations and tons of variables to estimate the impact that an economic/policy change has upon the market in question. (SWOSU).