Economic Impact Assessment

Economic impact assessment (EIA) measures the direct and indirect benefits of an existing or propsoed development project (e.g., a military base or an electric utility facility) on the local and state economy. EIA uses an “input-output model” to assess the economic and fiscal impact of a “project”. Such models takes economic activity associated with the development project as “input” data and projects the current and future impact on “output” in surrounding economies. It is important that the model provides dynamic estimates of the output that are reflective of expected fluctuations in the business cycle and local labor markets and demographics, rather than being a static snapshot of the project’s current impact.

The outputs from an EIA model are typically segmented into direct, indirect, and induced impacts. Direct impacts are related to the current operations and future growth of the project, such as anticipated growth in the size of project's employees, as well as planned project enhancements. Given the projected direct activity, the EIA model will provide estimates of the indirect and induced impacts through secondary effects resulting from the development. For example, when an existing military base hires a construction company, it results in employment that is indirectly attributable to the base. The induced impact resulting from the hiring of the construction company occurs when the construction firm and its suppliers hire additional employees and acquire additional supplies to complete the project. While these jobs are created due to the infrastructure project on the base, the new employees are not working directly on the base project, hence the term “induced impact.”

Projects may be private or public enterprise, for example existing businesses or government facilities. It is important to note that EIAs can provide the basis for comparing alternative projects.

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