Economic impact analysis
Encyclopedia
Economic impact analysis (EIA) examines the effect of a policy, program, project, activity or event on the economy of a given area. The area can range from a neighborhood to the entire globe. Economic impact is usually measured in terms of changes in economic growth
(output or value added) and associated changes in jobs (employment) and income (wages).
The analysis typically measures or estimates the level of economic activity occurring at a given time with the project or policy occurring, and calculating the difference from what would otherwise be expected if the project or policy did not occur (which is referred to as the counterfactual
case). This analysis can be done either before or after the fact (ex ante or ex post). The term economic impact can be applied to analysis of the economic contribution of a given activity or industry to the existing local economy.
EIA is one element of an environmental impact assessment
, which is required to examine impacts of proposed development projects. It is also commonly conducted when there is public concern about potential economic impacts of a proposed project or policy.
EIA differs from Cost-benefit analysis
(CBA) In one sense, EIA is broader in that it counts business relocation and resulting spending multiplier impacts on a given area, while CBA is usually not constrained to any specific study area and thus ignores effects of business activity shifts among locations. On the other hand, CBA is broader in that it also counts non-economic benefits that have a value to people though they do not directly effect the flow of money in the economy (such as the value of effects on personal travel time savings, safety, security and quality of life improvements).
. The most commonly used EIA tools for transportation studies are Transportation Economic Development Impact System
(TREDIS) and TranSight. Tools and techniques include:
, and during corporate site selection
projects. Examples include real estate development, business openings and closures, site selection
projects, tourism
, arts and recreation facilities, arts activities, individual industries and agricultural activities. The most commonly used tools for these studies are forms of Input-output analysis such as IMPLAN, RIMS-II, and REMI. The EIA is used by site selection consultants to increase community support for projects and in some cases to negotiate for tax incentives.
energy economic impact model is one example of regulatory use of an EIA.
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
(output or value added) and associated changes in jobs (employment) and income (wages).
The analysis typically measures or estimates the level of economic activity occurring at a given time with the project or policy occurring, and calculating the difference from what would otherwise be expected if the project or policy did not occur (which is referred to as the counterfactual
Counterfactual
Counterfactual may refer to:* Counterfactual conditional, a grammatical form * Counterfactual subjunctive, grammatical forms which in English are known as the past and pluperfect forms of the subjunctive mood* Counterfactual thinking* Counterfactual history* Alternate history, a literary genre*...
case). This analysis can be done either before or after the fact (ex ante or ex post). The term economic impact can be applied to analysis of the economic contribution of a given activity or industry to the existing local economy.
EIA is one element of an environmental impact assessment
Environmental impact assessment
An environmental impact assessment is an assessment of the possible positive or negative impact that a proposed project may have on the environment, together consisting of the natural, social and economic aspects....
, which is required to examine impacts of proposed development projects. It is also commonly conducted when there is public concern about potential economic impacts of a proposed project or policy.
EIA differs from Cost-benefit analysis
Cost-benefit analysis
Cost–benefit analysis , sometimes called benefit–cost analysis , is a systematic process for calculating and comparing benefits and costs of a project for two purposes: to determine if it is a sound investment , to see how it compares with alternate projects...
(CBA) In one sense, EIA is broader in that it counts business relocation and resulting spending multiplier impacts on a given area, while CBA is usually not constrained to any specific study area and thus ignores effects of business activity shifts among locations. On the other hand, CBA is broader in that it also counts non-economic benefits that have a value to people though they do not directly effect the flow of money in the economy (such as the value of effects on personal travel time savings, safety, security and quality of life improvements).
Transportation Planning
There is a well-developed literature on EIA for transportation planningTransportation planning
Transportation planning is a field involved with the evaluation, assessment, design and siting of transportation facilities .-Models and Sustainability :...
. The most commonly used EIA tools for transportation studies are Transportation Economic Development Impact System
Transportation Economic Development Impact System
Transportation Economic Development Impact System is a web-based analysis system that is used in planning major transportation investments in the US and Canada...
(TREDIS) and TranSight. Tools and techniques include:
- Transportation Research BoardTransportation Research BoardThe Transportation Research Board is a division of the National Research Council, which serves as an independent adviser to the President, the Congress and federal agencies on scientific and technical questions of national importance...
: Assessing the Economic Impact of Transportation Projects: How to Choose the Appropriate Technique for Your Project, Circular 477. - US Department of Transportation: Guide to Quantifying the Economic Impacts of Federal Investments in Large-Scale Freight Transportation Projects
- Federal Highway AdministrationFederal Highway AdministrationThe Federal Highway Administration is a division of the United States Department of Transportation that specializes in highway transportation. The agency's major activities are grouped into two "programs," the Federal-aid Highway Program and the Federal Lands Highway Program...
: Economic Analysis Primer
Economic Development
EIA is also applied for analyzing the impact of projects or actions impacting economic developmentEconomic development
Economic development generally refers to the sustained, concerted actions of policymakers and communities that promote the standard of living and economic health of a specific area...
, and during corporate site selection
Site selection
Site Selection indicates the practice of new facility location, both for business and government. Site selection involves measuring the needs of a new project against the merits of potential locations...
projects. Examples include real estate development, business openings and closures, site selection
Site selection
Site Selection indicates the practice of new facility location, both for business and government. Site selection involves measuring the needs of a new project against the merits of potential locations...
projects, tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
, arts and recreation facilities, arts activities, individual industries and agricultural activities. The most commonly used tools for these studies are forms of Input-output analysis such as IMPLAN, RIMS-II, and REMI. The EIA is used by site selection consultants to increase community support for projects and in some cases to negotiate for tax incentives.
Legislative and Regulatory
An EIA is commonly developed in conjunction with proposed legislation or regulatory changes. Many times the EIA is developed by the party lobbying for the legislative or regulatory change. The EIA is driven by a need to fully understand the impact of government action on the economy and impacted industries, as well as a desire to communicate the merits or detraction of the proposed action in a manner easily understood by outside parties. In addition to developing an understanding of the economic impact, an EIA is also used for lobbying, media relations, and community communication. The United States Department of EnergyUnited States Department of Energy
The United States Department of Energy is a Cabinet-level department of the United States government concerned with the United States' policies regarding energy and safety in handling nuclear material...
energy economic impact model is one example of regulatory use of an EIA.
See also
Economic impact analysis for specific policies and industries and other changes:- Economics of global warmingEconomics of global warming-Definitions:In this article, the phrase “climate change” is used to describe a change in the climate, measured in terms of its statistical properties, e.g., the global mean surface temperature. In this context, “climate” is taken to mean the average weather. Climate can change over period of time...
- Economic impacts of climate changeEconomic impacts of climate changeThis article describes the economic impacts of climate change.-Distribution of impacts:Climate change impacts can be measured as an economic cost . This is particularly well-suited to market impacts, that is impacts that are linked to market transactions and directly affect GDP...
- Economic impact of illegal immigrants in the United StatesEconomic impact of illegal immigrants in the United StatesThe economic impact of illegal immigration to the United States is a matter of study and debate relating to the nation's economy and politics. Undocumented immigrants contribute both benefits and costs to the U.S. economy...
- Economic effects of Hurricane KatrinaEconomic effects of Hurricane KatrinaThe economic effects of Hurricane Katrina, which hit Louisiana, Texas and Mississippi in late August 2005, were far-reaching. As of April 2006, the Bush Administration has sought $105 billion for repairs and reconstruction in the region, making it the costliest natural disaster in US history...
- Economic impact of immigration to CanadaEconomic impact of immigration to CanadaThe economic impact of immigration is an important topic in Canada. While the immigration rate has declined sharply from its peak early in the 20th century, Canada still holds the title of accepting more immigrants per capita than any other country....
- Economic impact of AIDSEconomic impact of AIDSHIV and AIDS affects economic growth by reducing the availability of human capital. Without proper nutrition, health care and medicine that is available in developed countries, large numbers of people are falling victim to AIDS....
- Impact analysis