Introduction And Defintion Of Economic Impacts Flashcards
What is the definition of economic impacts?
Economic impacts are effects on the level of economic activity in a given area. They may be viewed in terms of:
(1) business output or sales volume
(2) value added (or gross regional product)
(3) wealth (including property values)
(4) personal income (including wages)
(5) the creation of new jobs or the loss of jobs
What is the total sum of economic impacts?
Economic impact is the total of direct, indirect and induced impacts of a given project or event within a defined regional area
What are the direct economic impacts?
These include the expenditure and income generated at the event and within the event.
Can include payments of wages, taxes and dividends as well as expenditure by attendees.
What are the indirect economic impacts?
This includes business-to-business purchases and increased supply-chain activity to meets the needs of the event and their attendees.
Results from businesses being in direct receipt of expenditure due to increased demand.
Why would an event manager want to estimate the economic impacts of their event?
(1) event managers who wish to gain funding for new events need to quantify the economic benefits and drawbacks of hosting an event
(2) can be used to estimate benefit/drawback of public investment
(3) can be used to justify their requests for support from private and public sector sponsors
(3) can be combined with other studies to measure the economic impact of tourist activities within the community
(4) helps sell the event to the community particularly where public funds are needed to invest
(5) understand the long-tern impact on a community and help plan for major change
(6) can be used to identify economic development opportunities by evaluating the economic base (I.e. Which industries drive your economy and ‘missing’ industries in your region)
(7) fulfil statutory requirements to award incentives
What are the positive impacts of events on the economy?
(1) can be used to attract visitors to an area and thus ‘new money’
(2) creates new jobs and volunteering opportunities
(3) new infrastructure is built to cope with the demand which can improve the quality of life for the host community
(4) increase in trade for local business
What are the negative impacts on the economy by hosting an event?
(1) opportunity cost - displacement
(2) inflation
(3) jobs - will it poach staff from other areas of business
(4) conflicts with the community
What does displacement mean?
(1) Economic displacement arises when policy intervention which causes the expansion of one economic activity or activity in one location also has the effect of bringing about some degree of reduction in economic activity elsewhere. If you wish to measure the net gain from the policy or intervention we must take account of displacement effects.
(2) The best way to measure displacement is through survey work.
(3) Even where an intervention increases net tourism spend there may be wider displacement effects in the economy as spending and resources are shifted towards tourism from other sectors. This is why it’s important to distinguish between tourists and residents within the questionnaire.
What is a multiplier?
Multipliers depend on the ratio between the ‘direct’ and the ‘total’ impact. A ratio of 2:5 for the creation of jobs for instance means that for every one job created as a direct impact of the event an additional 1.5 jobs are created within the region resulting in a total of 2.5 jobs. Some of these jobs may be created outside of the event.
What is the change in final demand?
Exogenous change: means money coming in from somewhere outside of the community that is being measured. This results in a term known as ‘net new’ or ‘new money’.
For the event industry this would occur when visitors from outside that would have not otherwise been spent.
Estimate of gross visitor expenditure: the proportion of local goods in the total value of goods and services purchased by tourists. This provides the most important indicator of economic impact within the study area.
Why is new money important?
Crompton argues that only tourists who reside outside the community and whose sole purpose of visiting is to attend the event should be measured this is because all other expenditure would have occurred anyway.
Describe how an event manager would measure the economic impacts of their event?
(1) conduct surveys - destination-based and origin-based
(2) conduct traders surveys
(3) local business surveys
(4) visitor origins and volumes
(5) purpose of the trip (sole, main or mixed)
What information needs to be obtained from doing the economic impact study?
(1) demographics: age, occupation (social class), geographic location (post code) and gender
(2) spending on various items: accommodation, entertainment, travel, food and drink
(3) behavioural characteristics: taste in activities, choice of accommodation, type of information used in travel and spending patterns
List the conceptual issues that need to be considered when managing economic impacts at events.
(1) if an event manager does not conduct a thorough economic impact assessment the level of impacts can easily be overestimated if carefully structured working methodologies are not employed
(3) empirical issues relating to survey design, sampling techniques and expenditure estimation
(4) procedures employed may be flawed
(5) economic impact assessments are usually expenditure driven and the main source of controversy has been methodological issues surrounding measurement and interpretations of expenditure
(6) crompton (1999) states the integrity of economic impact studies is measured by the way different expenditure items are treated which fall into three categories: tourists, residents and local authorities
(7) only those who reside outside the community should be measured and whose sole purpose is visiting the region to attend the event
What are the range of methodological considerations that need to be considered when managing economic impacts at events?
(1) questionnaire design: designed to collect information to be used in the process of estimating local economic impact as well as planning for future tourism management activities and the information is classified into two broad categories: demographic and behavioural characteristics.
(2) data collection: two alternative survey methods are most commonly employed, these include:
> > > ‘the diary approach’ where respondents record their expenditures as they happen (theoretically this is the most accurate method but the required commitment may increase the risk of non-response bias)
‘the recall method’ where respondents are surveyed either by mail at their place of residence (origin-based surveys) or by interviewers onsite during the event (destination-based surveys)
(3) determination of sample size: the advantage of onsite interviews outweigh those of postal surveys completed at home as respondents may not recall all of their expenditure.
(4) sampling methods: crompton states that probability sampling (simple, random or clustered) is usually best but due to the nature of events this is not always straightforward and therefore choosing a sample method usually involves adopting the principles of both probability and non-probability especially when attempting to increase the size of the sample