Economic Impact Study

AnEconomic Impact Study is one of the more often used [#_Economic_tools_2economic tools] to facilitate the preparation of a robust urban plan. It tracesthe flows of spending associated with a spatial development to identify changesin economic activities of the sectors in a local/regional economy. This is doneby measuring or estimating the changes in [#_Economic_output economic output](like an increase in sales, income and jobs).

Economicimpact calculation

The modelused to measure the economic impact of an urban project development containsseveral modules (depending on the project scope). The figure below is anexample of an Economic Impact Model for a tourist, and residential area:

Figure:Example of an Economic Impact model [[Image:]]

Source: Decisio

The examplecontains three modules: construction, residential, and tourism. The main inputsfor the modules are determined by the scope of the project (the amount ofresidential units, hotel rooms, bars and restaurant, etc.).Based on the inputand its interrelationships, the module calculates the direct output impacts ofthe urban development.

TheEconomic Impact Model calculates the direct (primary), indirect and induced(secondary) effects of the urban development plan:

• [#_Primary_economic_impacts Direct effects] are production changes associatedwith the immediate effects of change in expenditures. An impulse inconstruction activity, for example, leads to an increase in wages, profits,taxes paid, et cetera.
• [#_Secundary_economic_effects Indirect effects]: are the production changesresulting from various rounds of re-spending of the receivers of the directspending impulse in other backward-linked industries. For example: architectsand brick suppliers will receive orders from the construction companiesresponsible for the construction of the ordered development.
• [#_Secundary_economic_effects Induced effects][#_Secundary_economic_effects :]are the effects resulting from the re-expenditures of households. Employees ofcompanies earn wages that are spend on goods and services. This means that notonly the construction companies’ purchases are included, but also theexpenses of the employees of the construction company, et cetera.

Modelcalculations

Based onthe direct input (the amount of invested capital and labour, etc.), economistscalculate the impact of the urban development project on the whole economy. Thisis mostly done with the help of so-called [#_Input/output_analysis_1Input-output analysis].

Datacollection and analyses

The dataand information model engineers need are mostly available from existing data orprevious studies. The following list shows some of the information needed:

Supplyinformation:

• Demographic statistics (resident population, employment statistics, number andtype of businesses, etc.)
• Thedetails of the [#_Development_plan Development Plan] (amount of planned hotelrooms, residential houses, etc.)
• Qualitative economic information (expected economic growth, the quality of thelocal economy, etc.)

Demandinformation:

• Statistical data on consumption, investments, export (e.g., the regional andlocal volume of tourist spending)
• Demandsurveys (e.g, for the real estate market, construction, and tourism)

Related subjects

[#_Social_cost-benefit_analysis_2Social Cost-Benefit analysis]