Economic impact analysis: Methodological note

Black P.A. (2004)


The purpose of this note is to provide a synopsis of the economic impact model used by economists involved in cost-benefit analysis or who are interested in estimating the direct, indirect and multiplier-induced effects of a relatively small investment project. Such efforts have a long history in the literature, beginning with the input-output based models of the regional income multiplier in the 1960s and 1970s, and culminating more recently in the broadly based and detailed social accounting matrices (SAMS) and computable general equilibrium (CGE) models. Whilst the latter models are particularly useful when simulating the inter-industry and inter-household effects of a given macroeconomic policy change, it is often more cost-effective to use a smaller version of these models to capture the overall economic impact of an individual investment project.

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