156: EDA Public Works in RI, 1996-2000 - State of Rhode Island ...

Appendix B:
APPLYING MULTIPLIERS: A SAMPLE CALCULATION
The economic multipliers used in the Rhode Island CEDS to determine the
full impact of projects that are candidates for priority listing come from the
Regional Input-Output Modeling System (RIMS) developed by the U.S.
Department of Commerce. They are of two types, “direct effect” and “final
demand.” The following discussion shows how to apply them in a hypothetical
situation – the construction of a new import/export center in the Port of
Providence.
According to the RIMS model, the category “new construction” has a
direct-effect employment multiplier of 2.3568, and a final-demand multiplier of
30.1 jobs for every million dollars invested. So, every single job in “new
construction” will yield an additional 1.3568 jobs elsewhere in the economy
(indirect and induced employment). These are the jobs added by suppliers,
distributors, service providers and other producers to meet the increased
demand resulting from the project.
If 84 workers are hired to build the import/export center, the following
impact would be expected on jobs throughout the Rhode Island economy:
84 jobs on site x 2.3568 = 198 total R.I. jobs
These 198 jobs would include the original 84 (direct employment), plus 114
additional jobs in other sectors of the economy (indirect and induced
employment).
If the new center cost $6.3 million to build, the impact on employment
during the construction period could be calculated by the final demand method as
follows:
$6.3 million in demand x 30.1 jobs/$1 million = 190 total R.I. jobs
Again, the 190 jobs would include direct, indirect and induced employment. The
discrepancy between the numbers of jobs calculated by the two methods is
insignificant and probably due to rounding.
These jobs would be generated until construction was completed. If
planners wanted to estimate direct, indirect and induced employment arising from
the operation of the import/export center, i.e., the post-construction, “long-range”
jobs, they would need to estimate the center’s operating expenses and then
identify the proper final-demand multiplier (in this case, “business services” at
39.7 jobs per $1 million invested).
B-1