1. Economic & Fiscal Impact Analysis
Dr. Garen K. Evans
April 16, 2003

2. Recent Impact Studies in Texas
Red Tide – Galveston County
Wind Turbines – Pecos County
Food & Fiber System - Texas
Cheese, Ethanol Plants
West Texas Spaceport

3. 2000 Red Tide

5. -- Galveston Parks Board of Trustees
Beach Cleanup Costs
“…red tide was not a problem in terms of cleanup…we’re always cleaning the beaches anyway…”
-- Galveston Parks Board of Trustees

6. Oyster Industry North Area West Area Central Area 24 days 852 bbl
Total Direct Losses
to the Galveston Oyster Industry
Attributed to the Red Tide
$ 167, 588

7. Tourism

8. Bridging the Data to the Model
Fresh Seafood Sales
Fishing Piers
Bait & Tackle
Souvenir Shops
Horse Rental
Hotels
Sporting Goods
Food Stores
Recreation
Retail
Lodging

9. Impact on Business

10. Sales by Sector SECTOR Food Stores Misc. Retail Lodging Amusement
TOTAL
Normal
$ 15.3
$ 11.8
$ 28.8
$ _
$ 102.3
Loss to RT
$ 4.1
$ 2.7
$ 3.7
$ _
$ 10.7 Million

11. Direct Impacts Beach Cleanup: - Oyster Fishing: $00.2 million
Tourism: $10.7 million
Total Direct Impact: $10.9 million

12. Local Economy Flow of Goods and Services
Industry
Exports/Imports
$$$
Inputs
Labor
$ $
Goods & Services
Local
Business
Households $
Exports/Imports
$$$

13. Direct Impact on Sales: $10.9 M
Indirect Impact: $2.5 M
Induced Impact: $4.0 M

14. Impact on Sales/Output
Direct Impact: $10.9 M
Indirect + Induced: $ 6.5 M
TOTAL: $17.4 M

15. Impact on Employment Direct Impact: 323 Indirect + Induced: 73
TOTAL:

16. Value Added =
Value of Output
minus
Cost of Good Sold

17. Factors of Production
LAND
LABOR
CAPITAL
MGMT
GOVT
Payment to Factors
RENT
INTEREST
WAGES & SALARY
PROFIT
BUSINESS TAXES

18. Impact on Value Added Direct Impact: $ 8.0 Indirect + Induced: $ 3.5
TOTAL: $ 11.5

19. Keeping Things in Context
Gross Regional Product: $7.2 BILLION
RT impact on Value Added: $11.5 Million
RT impact on Output: $17.4 Million
Employment: 110,752
RT impact on Employment: 396

20. Demographics, Commuting, Retail Sales,
OUTPUT, EMPLOYMENT,
VALUE ADDED ?
Demographics, Commuting, Retail Sales,
Government Revenues and Expenditures

21. I-O Assumptions Linear Production Perfect Elasticity
Constant returns to scale: 2X IN -> 2X OUT
Perfect Elasticity
Ignores structural changes: imports?
Fixed Input Structure
No input substitution

22. Econometric Model y = F(x)
ALTERNATIVE
- or -
COMPLEMENT

23. Econometric Models Modular Wide Range of Applications
One-time Policy Analysis
Data Intensive
Model revision, calibration

24. Econometric Components
REGRESSION EQUATIONS
Market Shares
Capture Ratios
Apportionment

25. Output = F(Relative costs, Natl. Output)
Regression Equations
y = a + b*x
ln(y) = a + b*ln(x)
Output = F(Relative costs, Natl. Output)

26. Regression Equations y = a + b*(C1 / C2) + d*Y y = Local Output
C1, C2 = costs
Y = National Output

27. Output = F(relative costs, National Output)
Jobs = F(Output)
Wages, Population, Taxes, etc.

28. Econometric Components
Regression Equations
MARKET SHARES
Capture Ratio
Apportionment

29. Market Shares Local Output = FRACTION * NATL OUT Manufacturing Durable
Non-durable
Services
Taxable
Non-taxable

30. Econometric Components
Regression Equations
Market Share
CAPTURE RATIO
Apportionment

31. Capture Ratio Taxable Retail Sales CR = taxable retail sales / income
(historical, regional, forecast)
Estimated Taxable Retail Sales = Ratio * Estimate of Income

32. Econometric Components
Regression Equations
Market Share Identities
Capture Ratios
APPORTIONMENT

33. Apportionment Expenditures Retail Sales Education Police Fire Health
Apparels & Accessories
Automobile Dealers
Building Materials & Hardware
Drug Stores
Eating & Drinking Places
Food Stores
Furniture & Home Furnishings
Gasoline Service Stations
General Merchandise
Miscellaneous Retail
Expenditures
Education
Police
Fire
Health
Welfare
Roads
Other

34. Galveston County

35. Conjoined Models Input-output + Something Else Econometrics CGE
Math Programming
Simulation

36. Methods Embedding Coupling Linking I/O provides info No interaction
Simultaneous integration
REMI
Linking
Output  Input
CPAN: Community Policy Analysis Network

37. Needed to predict the impact of annexation on a single county.
Virginia
Needed to predict the impact of annexation on a single county.
size economies in public service provision
quality of services
the effects of adjustment lags
variables related to annexation shocks (Swallow and Johnson 1987).

38. Wisconsin
Provides a source of understanding of the local economic structure, and is a tool that can be used to assist development practitioners of policy and impact analysis (Shields 1998)
Five Modules
Production
Labor
Demographics
Housing
Local Gov’t.
Non-production modules are based on pooled time-series and cross sectional data

39. Iowa
Developed to provide technical assistance to state and local decision makers
(Swenson and Otto 2000)
Run in stages:
Total area economic impacts are estimated with Implan
Employment and demographic components are estimated with econometrically-derived components.
State, county and city government revenues and expenditures are calculated

40. Texas
Capable of estimating economic, demographic, labor, and fiscal change for any county in Texas.
Updated in 2003
(Evans, Jones, and Stallman, 2003)
MS Excel-based: 25 worksheets
12 Simultaneous Regression Equations (3SLS)
“Implan is used to estimate total economic impacts, which drive the rest of the model. Changes in employment and compensation are linked to demographic, labor, and fiscal modules”

41. Fiscal Analysis

42. TEX$AFE Secondary data (254 counties cross-sectional)
New jobs and earnings
TEX$AFE
IMPLAN Input-output model
Regression
equations
Impacts: output value-added earnings jobs
Coefficients
Spreadsheet
Secondary data for county
Baseline, project, and impacts

44. Tex$afe: Jobs vs. People
Job Impact (Implan): 396
Commuting adjustment: -54
Reduction of local jobs: 342
Change in civilian labor pool: -241
Impact on employed persons: 101

45. Tex$afe: Fiscal Impacts
LOCAL REVENUE IMPACTS
County: -$1.256 M
Municipal: -$0.069 M
School District: -$0.539 M
Special Districts: -$0.046 M
Total: -$1.911 M

46. Tex$afe: Fiscal Impacts
Change to Local Revenues: -$1.911 M
less
Change to Local Expenditures: -$0.886 M
Total Fiscal Impact: -$1.025 M

47. An Introduction to Regional Economics
Edgar M. Hoover
Community Economic Analysis: A How To Manual
Ronald J. Hustedde, et al.
(Iowa State University)
Consumer’s Guide to Effective
Environmental Choices
Michael Brower and Warren Leon
(Union for Concerned Scientists)

48. TAMUG Class Presentation
mango.tamu.edu/garen
(for this presentation + review questions!)