What is an ‘Economic Impact Analysis’ and why does it matter?

What is an ‘Economic Impact Analysis’ and why does it matter?

This kind of study exercise is often pursued (or sooner or later required by a funder) where the institution, either private or public, requests finance from public funds.

An externally managed enquiry, based on objective and officially accepted methodology, seeks to measure the degree to which the relevant organisation delivers a net economic contribution to Society.

If a site ask for grant aid ultimately generated by tax (individual or corporate), obviously it is a good idea to show that the development proposed will actually increase the very tax supply that assisted it.  Work may embrace a spectrum of techniques to measure the direct, indirect and induced economic consequences of a site’s development at a given local, regional, national or cross-border level. This may be analysed through employment, tax revenue, income, or gross product (overall economic output).

For instance, when external grant aid is achieved for a zoo, botanic garden or zoo site, that financial stimulus moves through the local economy in successive waves: external contractors are paid;  employees of the contractor spend their wages at local shops, catering organisations, hotels and restaurants, garages, and so on; all of these local businesses purchase more supplies and employ more people.  The cascade effect of the orginal grant is worked out using ‘multipliers.’  These are standard accepted formulae derived from input-output analysis of an economic system calibrating the interaction of all major variables in an economic system.  The outputs of a given industry or organisation will be inputs for others, and so on.

No economic stimulus of course goes on forever in an infinite loop effect. This is due to ‘economic leakage’, money not recyled within a specifically defined economic system due to spending beyond geographic boundaries, tax flowing beyond the system, or savings. It is important to appreciate that the economic benefits measured are not solely (or mainly) those advantages ‘selfishly’ accruing to the grant aided site itself, but to the overall economy and to society as a whole.

An EIA can be developed for a site as it currently is, in which instance a counterfactual case may also sometimes be examined ( =  what would be the effect if the site didnot exist or not perform at a certain level).  Alternatively an EIA can be commissioned for a new proposed development.

Some studies go beyond a narrow economic assessment, measuring such social benefits as zoo volunteers (although these can of course be given a financial value), the zoo or aquarium’s contribution to education, to cooperation with scientific and academic institutions, to a sense of community cohesion, quality of life, positive and clear sense of place, cultural benefits, etc.  JRA’s  ‘The Manifesto for Zoos’ 2004   addresses some of these issues on a limited basis for some UK zoos, and can be download from this site.  EIAs are becoming commonplace in many countries, and studies have been done or are underway for EAZA, AZA, and BIAZA, and for many individual sites. Weblinks to some companies that carry out EIAs and whose websites provide more information include:

• http://www.oxfordeconomics.com/OE_Cons_Descns.asp
• http://edrtc.hbg.psu.edu/econ.htm

Please note JRA has no connection with these companies and has no responsibility for the information or services they provide. The links are offered purely to widen the client’s understanding of the concept and the options open.  Working with senior consultant Neil Kemsley (an economist formerly with the Bank of England) JRA has carried out a short form EIA for BIAZA.  JRA can discuss providing an EIA for your site at a fee level that is economic.