WHAT IS THE MULTIPLIER EFFECT?
WHAT METHODOLOGY WAS USED IN THIS STUDY?
WHAT IS THE DIFFERENCE BETWEEN DIRECT AND INDIRECT TAXES?
IS THIS A ONE-TIME IMPACT, OR DOES THE IMPACT REPEAT EACH YEAR?
WHAT ARE TRIPP UMBACH’S QUALIFICATIONS TO PERFORM ECONOMIC IMPACT ANALYSIS?
Economic impact begins when an organization spends money. Economic impact studies measure the direct economic impact of an organization’s spending, plus additional indirect spending in the economy as a result of direct spending. Economic impact has nothing to do with dollars collected by institutions, their profitability or even their sustainability, since all operating organizations have a positive economic impact when they spend money and attract spending from outside sources.
Direct economic impact measures the dollars that are generated within a geographic region due to the presence of an institution. This includes not only spending on goods and services with a variety of vendors within the region, and the spending of its employees and visitors, but also the economic impact generated by businesses within the region that benefit from the spending of the institution. It is important to remember that not all dollars spent by an institution stay in geographic region of study. Dollars that “leak” out of the region in the form of purchases from out‐of‐area vendors are not included in the economic impact that an institution has on the region.
The total economic impact includes the “multiplier” of spending from companies that do business with an institution. Support businesses may include lodging establishments, restaurants, construction firms, vendors, temporary agencies, etc. Spending multipliers attempt to estimate the ripple effect in the economy where the spending occurs. For example: Spending by an institution with local vendors provides these vendors with additional dollars that they re‐spend in the local economy, causing a “multiplier effect.”
WHAT IS THE MULTIPLIER EFFECT?
Multipliers are a numeric way of describing the secondary impacts stemming from the operations of an organization. For example, an employment multiplier of 1.8 would suggest that for every 10 employees hired in the given industry, eight additional jobs would be created in other industries, such that 18 total jobs would be added to the given economic region. The multipliers used in this study range from 1.8 to 2.0.
The Multiplier Model is derived mathematically using the input-output model and Social Accounting formats. The Social Accounting System provides the framework for the predictive Multiplier Model used in economic impact studies. Purchases for final use drive the model. Industries that produce goods and services for consumer consumption must purchase products, raw materials and services from other companies to create their product. These vendors must also procure goods and services. This cycle continues until all the money is leaked from the region’s economy. There are three types of effects measured with a multiplier: the direct, the indirect, and the induced effects. The direct effect is the known or predicted change in the local economy that is to be studied. The indirect effect is the business-to-business transactions required to satisfy the direct effect. Finally, the induced effect is derived from local spending on goods and services by people working to satisfy the direct and indirect effects.
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Direct effects take place only in the industry immediately being studied.
- Indirect effects concern inter-industry transactions: Because an institution is in business, it has a demand for locally produced materials needed to operate.
- Induced effects measure the effects of the changes in household income: Employees of an institution and suppliers purchase from local retailers and restaurants.
- Total Economic Impacts are the total changes to the original economy as the result of the operations of an institution, i.e., Direct effects + Indirect effects + Induced effects = Total Economic Impacts.
WHAT METHODOLOGY WAS USED IN THIS STUDY?
IMPLAN (IMpact analysis for PLANning) data and software. Using classic input-output analysis in combination with regional specific Social Accounting Matrices and Multiplier Models, IMPLAN provides a highly accurate and adaptable model for its users. The IMPLAN database contains county, state, ZIP code and federal economic statistics that are specialized by region, not estimated from national averages, and can be used to measure the effect on a regional or local economy of a given change or event in the economy’s activity.
Employment impact measures the direct employment (employees, staff, faculty, administration) plus additional employment created in the economy as a result of the operations of an institution.
Indirect and Induced employment impact refers to other employees throughout the region who exist because of an institution’s economic impact. In other words, jobs related to the population — city services (police, fire, EMS, etc.), employees at local hotels and restaurants, clerks at local retail establishments, and residents employed by vendors used by the institution.
WHAT IS THE DIFFERENCE BETWEEN DIRECT AND INDIRECT TAXES?
Direct tax dollars include sales taxes and net corporate income taxes paid directly by the institution to the state, while indirect taxes include taxes paid to the state by vendors that do business with an institution and individuals.
IS THIS A ONE-TIME IMPACT, OR DOES THE IMPACT REPEAT EACH YEAR?
The results presented in this economic impact study are generated on an annual basis. The economic impact in future years can be either higher or lower based on number of employees, students, capital expansion, increases in external research and state appropriations.
WHAT ARE TRIPP UMBACH’S QUALIFICATIONS TO PERFORM ECONOMIC IMPACT ANALYSIS?
Tripp Umbach is the national leader in providing economic impact analysis to leading health care organizations, universities and academic medical centers. Since 1990, Tripp Umbach has completed more than 300 economic impact studies for such clients as: Boston University, Indiana University, Michigan State University, The Pennsylvania State University, The Ohio State University, UCONN, the University at Buffalo, University of Arizona, University of Michigan, University of Minnesota, The University of Pittsburgh, the University of Vermont, the University of Virginia and The University of Washington.Tripp Umbach has assisted UAB with multiple economic impact assessments during the past 20 years.