ECONOMIC IMPACT ANALYSIS TOOL
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Economic Impact (Input-Output) Analysis Tool for Regional Infrastructure Investment Projects
This project provides private and public stakeholders with an online tool to conduct a preliminary input-output (I-O) analysis for estimation of regional economic impacts of infrastructure investment projects. This online tool provides I-O models for local government areas across the nation.
I-O models provide a standard approach for the estimation of the economic impact of a particular activity (e.g. construction of a new infrastructure project). Regional economic impact statements regarding the impact of major projects and policies has become a critical part of regional development analysis, and is an extensive component of the applied economic literature. The linkages between employment opportunities and residents – and business to business linkages – affect urban design and transport systems (journey to work), infrastructure demand and provision, regional taxes etc.
This tool draws on 2011 Census industry of employment data and the 2009/10 national I-O table to calculate industry multipliers which in turn provide estimates of economic impacts of regional infrastructure investment projects.
It allows the user to select a Local Government Area in which the infrastructure investment project is going to take place. The user should consider only expenditures expected to occur in the region, expenditures that will occur outside the region should be excluded. The ‘Data Inputs’ side menu allows the user to input direct capital expenditures (in basic or producer prices which excludes margins, taxes and subsidies as opposed to consumer prices) in million dollars ($M) that will occur in each industry sector for up to ten years. As the information is entered, the data is summarised and made available to print in a series of graphs and tables accessible via the two tabs – ‘Data Input Graphs’ and ‘Data Input Tables’.
The linkages between employment opportunities and residents – and business to business linkages – affect urban design and transport systems (journey to work), infrastructure demand and provision, regional taxes etc.
In addition, the model is run and summarised and can be printed as a series of graphs and tables accessible via the ‘Economic Impacts’ side menu and its three tabs: ‘Summary Economic Impacts’, ‘Economic Impacts Graphs’ and ‘Economic Impacts Tables’.
There are a number of important assumptions that underpin the use of an I-O model, these must be considered in interpreting the predicted impacts. They include:
a) increases in demand in the region are serviced by industries with constant proportions, there are no significant price adjustments that occur
b) industries have a linear production function, which implies constant returns to scale and fixed input proportions
c) firms within a sector are homogeneous, which implies they produce a fixed set of products that are not produced by any other sector and that the input structure of the firms are the same, and
d) the model is a static model that does not take account of the dynamic processes involved in the adjustment to an external change.
Using I-O analysis for estimation of regional economic impacts requires a great deal of information. The analyst needs to know the magnitude of various expenditures and where they occur. Also needed is information on how the sectors receiving this expenditure, share their expenditures among the various sectors from whom they buy, and so on, for the further expenditure rounds. While private and public stakeholders can use this powerful tool to conduct preliminary I-O analysis, it is recommended that expert consultants are engaged for a full and detailed report on the estimations of economic impacts and the interpretations.
The EIAT is developed based on the location quotient adaptation of the 2009/10 national I-O table of 19 industry sectors (consistent with the 2006 Australian and New Zealand Standard Industrial Classification (ANZSIC) 1-digit level) using the 2011 Census industry employment data for local government areas in all the states and territories of Australia.
The EIAT interface provides end users a framework to input price data and to receive estimations of economic impacts of regional infrastructure investment projects.
The side menu of the interface for these two components is designed as:
- Input Price Data
- Enter the start year (the year that the construction phase of the infrastructure project start)
- Enter the end year (up to ten years; the year that the construction phase of the infrastructure project ceases)
- Select a Local Government Area (LGA)
- Enter the direct capital expenditures (in basic prices) associated with the construction of the infrastructure project by industry that occur in the region (expenditures that will occur outside the region should be excluded)
- Data Input Graphs to view and print data inputs in graphs
- Data Input Tables to view and print data inputs in tables
- Summary Economic Impacts to view and print summary economic impacts results
- Economic Impacts Graphs to view and print economic impacts results in graphs
- Economic Impacts Tables to view and print economic impacts results in tables
The EIAT also provides end users with some background information on the based data and the method of analysis. The side menu related to these two elements is designed as:
- National I-O 19 Sectors to view the 2009/10 national I-O table consistent with the 2006 Australian and New Zealand Standard Industrial Classification (ANZSIC) 1-digit industry codes (19 sectors)
- Regional Employment (in LGA) to
- View 2011 Census dataset covering journey to work employment by industry
- View 2011 Census dataset covering locally employed residents by industry
- Regional I-O 19 Sectors to view regional I-O table consistent with the 2006 Australian and New Zealand Standard Industrial Classification (ANZSIC) 1-digit industry codes (19 sectors)
Method of Analysis
- Location Quotient Method
- Input-Output Multipliers
- Impact Factor Analysis
An instruction manual and a user case study are also provided.
PROJECT TEAM OVERVIEW
The Australian Industrial Transformation Institute (AITI) is a strategic research Institute based at Flinders University and undertakes trans-disciplinary industry and workplace research in support of industrial and workplace transformation.
AITI provides high level industry, economic and workforce research in response to major change and explores the industries and jobs of the future. AITI also specialises in foresighting, demand mapping, value chain analysis and cluster development. The research seeks to deepen understanding of the human and institutional dimensions of change, inform strategy, policy and program development.
Professor Barry Burgan
07 5595 3070
Dr Parvin Mahmoudi
Associate Professor John Spoehr
08 8201 5291