Economic Impact
Articles
Economic Impact: Basics of Economic Measurement
What is economic impact?
Whenever there is a change in economic activity, such as a new investment in infrastructure, an increase in visitors, businesses opening or closing, or land taken off the tax roles for some reason, it may cause changes in spending, saving, investment, and/or asset value (e.g., property value, value of environmental protection). To know the economic impact of any change in economic activity, you must know the level of activity before the change and the level of activity after the change. If you do not know the level of activity before the change occurs, you cannot measure economic impact. Economic impact includes the positive and negative changes in economic behavior. Economic impact is often measured in terms of jobs and changes to the tax base and tax revenues, but these are not the only ways in which an economy may be impacted.
What types of economic impacts apply to byways?
Byways are designated to preserve and enhance unique intrinsic qualities that may be scenic, historic, natural, archaeological, cultural, or recreational. Activities that enhance intrinsic qualities, such as investment in historic preservation, natural resource conservation and trail building, may add to the economic activity of your byway corridor directly and indirectly. Investments in planning, construction, and operations related to intrinsic qualities pump dollars directly into the local economy. These investments, along with marketing and other activities, may also lead to new spending by residents and visitors to your byway corridor.
Why would I want to know the economic impact of byways designation?
Protecting and enhancing a byway’s intrinsic qualities costs money. If you knew the economic impact of the activities you do to enhance your byway, you could use this information to justify additional investments over time and to explain to the public as well as local, State, and national officials another reason why your work matters.
In addition, through greater understanding of how your byway generates or fails to generate economic impacts, you can adjust your activities to result in greater positive impact and fewer negative impacts over time if this is your goal.
Why isn’t there a national number for America’s Byways?
There is no national number for the economic impact of byways, and, even if there were, it would have very little meaning. This is because each byway is unique in location, size, population base, economic base, and intrinsic qualities. If byways were not unique places, they would not have received designation.
What about State tourism numbers?
State tourism numbers reflect statewide spending patterns. While some byways extend through more than one State, many are limited to much smaller sub-State areas. States are not universally consistence in how they measure economic impact. Some States include only overnight visitors, while other States also include in-State travelers in their numbers. These numbers generated at a State level, regardless of whether they include only out-of-State or a combination, include any spending within the State borders regardless of destination. State tourism numbers can be an important part of a tool to measure the economic impact of byways, but they will not give you an accurate picture all by themselves.
What are REMI or MGM2 Models?
Econometric models generate multipliers that are based on assumptions about the proportion of each dollar that is re-spent in the local economy. Multipliers are typically calculated at the county and/or State or national level and do not accurately reflect local impacts which are far smaller since there are fewer goods, services, and employment opportunities in a local economy. Models typically overstate impacts at the sub-county level.
Econometric models like IMPLAN or REMI or RIMS are not designed to yield meaningful results at the sub-county level which is where many byways operate. MGM2 is targeted to local areas but often relies on estimates of spending patterns since actual survey-based data is often unavailable. The results of any model are only as good as the information that goes into it. Most information that goes into these models is only available at the county or State level and may not accurately reflect local conditions. These models also rely on production relationships that may no longer be valid. For example, the economic impact of adding a call center to a local business will be very different if the call center function is out-sourced than if it is local. A model based on local impacts will not accurately reflect impacts of out-sourcing.
Econometric models are, by their very nature, based on complex mathematical formulas that are difficult for most people to understand, let alone explain to others. Therefore, local decision-makers are generally unable to question the assumptions behind the model or recalculate results based on local knowledge.
So, how can one tie economic impact to byways designation?
Measuring the economic impact of byways designation is tricky because the roadways and their intrinsic qualities were there before designation occurred. Therefore, the only impacts that should be attributed to designation are those that relate directly to activities that stem from designation. Broadly speaking, these activities fall into two categories: investment in intrinsic qualities and marketing or public relations.
How important is our corridor management plan in measuring economic impact?
Ideally, your corridor management plan should identify the intrinsic qualities in your byway and your plans to protect and enhance these qualities over time. To measure economic impact, you need to know the levels of investment and spending before designation as well as after. If corridor management plans included a snapshot of economic activity related to intrinsic qualities and key byways sites before designation, this would provide a very useful baseline for economic impact. Without this baseline, byways will have to create their own baseline the first time they measure impact and then again after they complete specific planned activities. There are various stages in the life of a byway. Anticipation is the period of planning and preparing an application that precedes designation. Investment may occur during the anticipation stage. Designation is the period from the official conferring of designated status to actual changes on the ground resulting from designation. Implementation is the period during which resources are directed toward physical changes on the ground.
Maturation is the period after implementation related to designation is largely complete.
If you do not have pre-designation baseline information, you may be able to establish baselines that are pre-implementation or pre-maturation.
What would an ideal tool to measure economic impact of byways include?
We think an ideal tool would give byways organizations of all types a way to measure two things: 1) the level of investment in intrinsic qualities over time that can be directly related to byways designation; and 2) the patterns of visitation to sites of significance to the byway that are included in the corridor management plan. Investment would include dollars spent on intrinsic qualities for planning, construction or protection, and operations. Patterns of visitation to sites of significance would provide a basis for calculating spending by residents, in-State, and out-of-State visitors. Taken together, these would paint a picture of the impacts of byways designation and related activities. An ideal tool would incorporate local knowledge and be easy to explain to residents, local officials, and others. Using the tool would help byways engage new partners. It would also provide information that allows byways organizations to adjust their activities to reach their goals with respect to economic impacts.
