BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center for Business and Economic Research BALL STATE UNIVERSITY Regional Impact Modeling Michael Hicks

BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center 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 UNIVERSITY Center 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 1/3 rd of growth forces

BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center for Business and Economic Research BALL STATE UNIVERSITY How to Measure? Historical study Case Study Economic Model

BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center for Business and Economic Research BALL STATE UNIVERSITY

BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center for Business and Economic Research BALL STATE UNIVERSITY

BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center for Business and Economic Research BALL STATE UNIVERSITY

BUREAU OF BUSINESS RESEARCH BALL STATE UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center 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 UNIVERSITY Center for Business and Economic Research BALL STATE UNIVERSITY