Methodology for GRA economic impact study
What was studied
This report is derived from a study that utilized input-output analysis to determine direct, indirect and induced industry effects and employment as a result of spending, programs, partnerships and other activities created through the work of the Georgia Research Alliance (GRA), its member institutions, established and start-up companies and other organizations. Since its development, input-output analysis has served as a primary tool for tracing the linkages between various economic sectors and regional economies.
For purposes of the study, the State of Georgia represents the regional economy measured with respect to the economic impacts of GRA-sponsored or -related activity.
All spending data is based on average dollar amounts for the periods FY2007-12 or FY2007-11, using the data most recently available as of the time of the analysis. Included is annual spending for all GRA operations and programs and partnerships it administers and/or oversees. Also included is annual capital and equipment spending generated by GRA during the period. Amounts have been adjusted for inflation and are reported in FY 2014 dollars. Inflation is calculated using the seasonally adjusted Consumer Price Index (CPI) for “All Urban Consumers (CPI-U), U.S. City Average, All Items,” from June 2012 to June 2014.
The report does not include spending by students who may have attended GRA member institutions because of research or programs resulting from GRA-related activities. The report also does not include spending by visitors to Georgia who may have come to the state to attend conferences or seminars, consult or for other professional purposes resulting from GRA-related activities.
Benefits not measured
The larger benefits that accrue to Georgia from the existence and work of GRA – such as fostering a creative entrepreneurial class, building a stronger research and development cluster, catalyzing a more innovative business sector, expanding the economic base through opportunities for increased product exports and helping citizens lead healthier and more prosperous lives – are more difficult to quantify and are not included in this analysis. Long term, however, these benefits are likely more important to the future success of the state and well being of its people.
Sources
All source data was compiled and provided by GRA. Direct spending amounts used for the analysis included: spending by GRA and the State; spending by GRA’s member universities to help fund labs and research; spending by businesses through private industry partnerships created as a result of GRA activities; private foundation and other philanthropic dollars spent to support programs and activities under GRA auspices; and Federal funds coming to Georgia because of GRA-related activities.
The input-output model, analysis of the data, and resulting economic impact calculations were performed by the firm EMSI (Economic Modeling Specialists, Inc.), a CareerBuilder Company based in Moscow, Idaho. Further review of the data and assistance in preparing the report was provided by Cross Channel Initiatives, Inc., a strategy consulting firm based in Atlanta, Georgia. Report writing and design were provided by Versal, a branding and communications firm based in Decatur, Georgia.
Multiplier effect
Based on the analysis, multiplier effects have been derived to measure the impact on the Georgia economy from GRA and the programs, initiatives and partnerships that it operates – or that exist because of GRA-related activities. GRA’s derived multipliers total 2.12 for jobs and 1.87 for earnings. In considering the impact or multiplier effect, it is important to recognize that the methodology used represents an estimate of actual economic activity. Because of individual supplier arrangements between individual business establishments and unique consumer preferences, it is impossible to state precisely the extent to which all transactions actually occurred within state boundaries.
More about input-output modeling
Households, businesses and governments are connected in a complex web of interdependent relationships based on producing, selling, purchasing, and taxing goods and services, and each activity in one place tends to have effects in other places.
An input-output model is a way of representing the flow of money in an economy in a defined geographic region. It focuses primarily on industries, while also accounting for government, households and regional imports and exports. An industry is a group of business establishments that share similar end products (or services) and processes for creating those products/services.
Once the flow of money is represented in the model, a user can introduce events that change the flow (such as loss or gain of jobs/sales in one industry) and simulate its effects on each industry in the region, as well as the region as a whole.
By tracking the flow of money from one entity to the next, one can get a sense of the interconnectedness of the industries, households and government entities that occupy a given geographic space and build models to simulate and display these relationships. The input-output model therefore indicates how a change in one part of the economy will ultimately affect other parts based on these purchasing and selling relationships.
Direct impacts include the initial direct spending, jobs or earnings as input. These figures do not contain any economic “ripple effects.” Indirect impacts quantify how direct increases in spending, jobs and earnings lead to ripple effects throughout the regional economy. This includes increased activity caused by companies purchasing more goods and services from suppliers and, subsequently, the suppliers purchasing more goods and services from their suppliers. Also included in the indirect category are the increased earnings effects (or induced effects) caused by new earnings being distributed to employees who then use these funds in the region for their own purchases of food, clothing, and other types of goods and services.
Finally, total economic impact is the sum of direct and indirect/induced effects and represents the total impact in a given region in terms of overall spending, jobs and earnings. Multiplier effects can be derived and indicate the total increase to the region as a result of direct increases in spending, jobs or earnings.
