Economic Impact Analysis Basics for City and County Leaders

Economic Impact Analysis (EIA) helps assess how projects affect a community’s economy. It measures direct impacts such as job creation, indirect effects from supply chains, and induced effects from employee spending. EIA provides data-driven insights on employment, tax revenue, and infrastructure needs. It supports funding applications and helps prioritize investments that benefit the community.

Key Takeaways

• Economic Impact Analysis quantifies direct, indirect, and induced effects to assess a project’s total economic footprint.

• EIA uses input-output models to show interconnections between sectors and identify opportunities for investment and expansion.

• Combining community input with data improves accuracy and legitimacy and builds stakeholder support.

• EIA results inform decisions on zoning, infrastructure, and resource allocation.

• Transparent reporting ensures accountability and alignment with community goals.

What Is Economic Impact Analysis and Why Does It Matter?

Economic Impact Analysis measures direct, indirect, and induced effects of a project. Direct impacts come from initial spending or job creation. Indirect effects arise from supply chain activity. Induced effects result from employee spending. Together, these effects describe the total economic footprint of a project. EIAs are used to justify project approvals, secure funding, and communicate benefits such as jobs, earnings, and sales to taxpayers and stakeholders. Public-sector leaders rely on EIAs to evaluate construction and operational impacts across sectors.

Understanding the Key Components of Economic Impact Analysis Economic Impact Analysis Basics for City and County Leaders

EIA separates impacts into direct, indirect, and induced effects. The total economic impact is the sum of all three. Input-output analysis and the Leontief inverse are used to translate demand changes into output and employment changes. Regional data and production linkages are used to calculate multipliers for jobs, earnings, and sales. Outputs such as projected employment and sales support funding, approvals, and policy decisions Economic Impact Analysis Basics for City and County Leaders.

How EIA Benefits Municipal Decision-Making

EIA supports municipal decision-making by quantifying local economic impacts such as jobs, earnings, and sales. Input-output models and the Leontief inverse estimate ripple effects across sectors. EIAs inform zoning, infrastructure investment, and development approvals by translating proposals into measurable economic outcomes. Reports provide data-driven justification for public investment and policy choices.

Understanding Direct, Indirect, and Induced Effects of Economic Impact

Direct effects come from initial spending, such as construction jobs and material purchases. Indirect effects occur when suppliers respond to new demand. Induced effects result when workers spend their earnings. The total economic impact is the combined effect of all three, showing how a project ripples through the local economy.

The Role of Input-Output Tables in Economic Impact Analysis

Input-output tables show how economic sectors are connected and how outputs from one sector support others. They allow the use of Leontief multipliers to measure full economic effects. These tables trace money through supply chains and household spending, use regional data for accuracy, and identify which sectors respond most to investment.

Essential Considerations for Conducting Economic Impact Analysis

An EIA must include direct, indirect, and induced effects. Input-output models and Leontief inverse calculations quantify how spending moves through suppliers and households. Analyses should account for construction-phase impacts and permanent employment at full operation. Results are used by developers, economic development organizations, tax credit sponsors, and industry groups to support funding, policy advocacy, and project justification.

How to Interpret and Communicate Economic Impact Findings

Economic impact findings should use clear multipliers to connect spending to jobs, earnings, and sales. Reports should present concrete outputs such as construction jobs and annual sales. Transparency around methodology, data sources, and assumptions builds trust. Broader community impacts such as housing and local business activity should also be highlighted.

Effective Tools for Economic Impact Analysis

Effective EIA relies on measuring direct, indirect, and induced effects. Input-output tables and Leontief inverse calculations model ripple effects across sectors. Multipliers convert spending into employment and output impacts. Regional data and structured reporting support clear communication with decision-makers.

Why Engaging Stakeholders Matters in Economic Impact Evaluations

Stakeholder engagement ensures analyses reflect community values such as housing, quality of life, and infrastructure. Local knowledge improves data accuracy and methodology. Engagement builds buy-in, aligns metrics with community goals, and fosters transparency and trust.

Case Studies: Successful Economic Impact Analyses in Greensboro, NC

Greensboro uses economic impact analyses to evaluate land use and development decisions. Analyses measure employment, tax revenue, and infrastructure needs through direct, indirect, and induced effects. Findings support grant applications and emphasize job creation and earnings multipliers. Stakeholder engagement and transparent reporting help align outcomes with workforce development and quality-of-life goals.