Economic Impact Studies

1
Economic Impact Studies

• Rationale
• Most economic impacts attributable to PR
• Yet, traditionally
• PR uses financial reports while tourism Econ.
• different positions losers vs. gainers
• E.I.A. is an inexact process Best Guess
• Though many believe it is scientific
• Objective is to legitimize position
• Overall goal should be accuracy

2
Economic Impact Principles

• Exclusion of Local Residents
• Must reside locally visiting b/c of the event
• Economic Surge or Activity worthless
• Exclude Time-Switchers Casuals
• T.S. would have come anyway
• C were in community anyway
• Use of Income, not Sales Output Measures

3
Multiplier Concept (Figure 4)

• Direct Impact (Initial injection of )
• then re-spent one of six ways 1st Rd
• If re-spent locally multiplies!
• Otherwise Leakage
• Indirect Subsequent rounds re-spent
• By local business and local government
• Induced Household income re-spent
• In other businesses in the city

4
Alternative Measures of E.I.

• Sales or Output (D ID IN) on community
• Impact on future sales
• No insights into guiding policy though
• Personal Income (DIDIN) on income!
• Impact on extra income for residents
• Usually of most interest to community
• Value Added Same as P.I
• property income indirect business taxes

5
More E.I. Principles

• Use multiplier coefficients not multipliers!
• (D ID IN)/injected visitor expenditures
• Gives personal income accrued per dollar
• Multiplier (D ID IN)/D much higher!
• Only a measure of internal leakage no guidance
• Careful interpret. of employment measures
• of jobs per 1 million in direct sales
• Type of job not disentangled
• Assumes all employees fully occupied
• Not all jobs will go to local people

6
Illustration of E.I.A Abuse!

• Includes local residents in the analysis
• economic activity, not economic impact
• Uses value of sales AND personal income
• Not just personal income
• Includes time-switchers and casuals
• Fails to note combo of part/full-time jobs

7
Consideration of Costs

• Should look at benefit-cost analysis!
• Infrastructure Costs
• On-site equipment, supplies, labor, time
• Off-site traffic, accidents, vandalism,
  environ-mental degradation, increased prices,
  etc.
• Displacement Costs
• Caused by crowds, or no hotel space
• Opportunity Costs
• Highest return and best use?