Regional Impact Modeling Michael Hicks
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Transcript of Regional Impact Modeling Michael Hicks
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Regional Impact Modeling
Michael Hicks
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Regional Impact ≠ ED or Growth
You can have a new firm or activity that generates regional impact, without relevant economic development and at a time of negative economic growth.
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Economic Growth is caused by:
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
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
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.
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Economic Development
A process by which communities attract, retain and reinvest wealth to improve the quality of life.
-David Dodson
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
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.
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
How to Measure?
• Historical study
• Case Study
• Economic Model
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Economic Model: Input-Output
• 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
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
How Input-Output Works
New Firm
Buys equipment
Builds Facility
Hires workers
Buys services
Pays taxes
leakages
Impacts
The size of the impact depends on the size of investment, wages, etc., and the share of leakages (geography and industry).
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
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
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
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.)
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
What Does Impact Tell You?(second order issues)
• 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.)
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Limitations
• Data is 2-3 years old
• Site specific taxes need watching
• No labor supply constraints
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY
Summary
• 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
BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITYCenter for Business and Economic Research BALL STATE UNIVERSITY