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REGIONAL MULTIPLIERS
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Introduction
Effective planning for public- and private-sector projects
and programs at the State and local levels requires a systematic
analysis of the economic impacts of the projects
and programs on affected regions. In turn, systematic
analysis of economic impacts must account for the interindustry
relationships within regions because these
relationships largely determine how regional economies
are likely to respond to project and program changes.
Thus, regional input-output (I-O) multipliers, which account
for interindustry relationships within regions, are
useful tools for regional economic impact analysis.
In the 1970’s, the Bureau of Economic Analysis (BEA)
developed a method for estimating regional I-O multipliers
known as RIMS (Regional Industrial Multiplier
System), which was based on the work of Garnick and
Drake.1 In the 1980’s,BEAcompleted an enhancement of
RIMS, known as RIMS II (Regional Input-Output Modeling
System), and published a handbook for RIMS II
users.2 In 1992, BEA published a second edition of the
handbook, in which the multipliers were based on more
recent data and improved methodology. Now, BEA is
making available a third edition of the handbook, in response
to requests by users for additional discussion of
the data that they must provide in order to use RIMS II
and of the data sources and methods used for multiplier
estimation. Themultipliers in the third edition reflect I-O
data for 1987, the most recent benchmark year for which
BEA’s national I-O data are available.
RIMS II Multipliers for Output, Earnings, and Employment
RIMS II provides users with five types of multipliers:
Final-demand multipliers for output, for earnings, and
for employment and direct-effect multipliers for earnings
and for employment. These multipliers measure the economic
impact of a change in final demand, in earnings,
or in employment on a region’s economy.6 This section
defines the RIMS II multipliers and gives brief examples
of their use. (For a detailed discussion of the source
data and methods used in the derivation of the RIMS II
multipliers, see appendix A.)
Final-Demand Multipliers for Output
The final-demand multipliers for output are the basicmultipliers
from which all the other RIMS II multipliers are
derived. They are presented in the final-demand output
multiplier table. (For a sample of this table, designated
as table 1.1, see appendix D.) In this table, each column
entry indicates the change in output in each row industry
that results from a $1 change in final demand in the
column industry. The impact on each row industry is
calculated by multiplying the final-demand change in the
column industry by the multiplier for each row. The total
impact on regional output is calculated bymultiplying the
final-demand change in the column industry by the sum
of all the multipliers for each row except the household
row.7
Choosing a Multiplier
The choice of multiplier for estimating the impact of a
project on output, earnings, and employment depends on
the availability of estimates of the initial changes in final
demand, earnings, and employment. If the estimates of
the initial changes in all three measures are available, the
RIMS II user can select any of the RIMS IImultipliers. To
assess the reasonableness of the impact estimates based
on the multiplier selected, the user can compare these estimates
with the estimates based on the other multipliers.
In theory, all the impact estimates should be consistent
Affected Industries
The user must determine which industries are initially
affected by the project or program. The specification
of these industries in the maximum possible detail will
promote the accuracy of the impact analysis. If possible,
the industries should be selected from the list of detailed
industries for which RIMS II multipliers are available
(appendix B). Otherwise, the industries must be selected
from the list of aggregations of industries for which the
multipliers are available (appendix C).
For example, suppose that the user plans to analyze the
impact of a new meat-packing plant in the Kansas City
economic area. The impact should be calculated with
the multiplier for the industry of meat-packing plants and
sausages and other prepared meat products (the meatpacking
industry), not with the multiplier for the industry
of food and kindred products and tobacco products,which
comprises the meat-packing industry and 44 other industries.
The final-demand output multiplier for the
meat-packing industry is 4.1213, so that a $100,000 increase
in final demand for meat packing is calculated to
result in a total output increase of $412,130 in the economic
area. However, if the multiplier of 2.6498 for the
food and kindred products and tobacco products industry
is used, the estimated increase in total output is only
$264,980.