Transcript DECD and REMI

DECD and REMI
Stan McMillen, Ph.D., Managing
Economist
Joan McDonald, Commissioner
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REMI Studies
CCEDA – CT Convention Center, Front Street, Science Center, parking complex
CT CCC - Film Tax Credit
CCEF - RE/EF Industries & Jobs
CCIC – Impact of CT Private Colleges & Universities
OPM – Estate Tax Study
DOT – I-84/Rte. 8 Interchange Impact
CI – Investment Portfolio Impact
CT CCC – Culture & Tourism Impact
UConn – Impact of University of CT system
Mystic Seaport – Impact of Current Operations & Proposed Buildout
Dairy Industry Impact
CT Rail Impact
The Contribution of Bradley International Airport to CT’S Economy
The Contribution of the Groton Naval Sub Base and the Electric Boat Company to the
Economies of Connecticut and Southeastern Connecticut
The Economic Impact of a Cruise Ship Visit on Connecticut's Economy
The Economic Impact of Avian Influenza on Connecticut’s Egg Industry
Agency business development projects, CHFA housing projects, in-house tax
analysis
REMI Studies
• CT Convention Center, Science Center,
Front Street & parking complex
– Counterfactual analysis for CCC
– Buildout analysis for future phases & phases
in progress
• Use credible sources for retail sales and visitor
spend, detailed construction spend available
– Separate parking analysis
REMI Studies
• CT CCC - Film Tax Credit
– Use 2006 statute to assess first year impact of
FTC
– Comb through production companies
expenditure records for qualified expenditures
– Use conservative assumptions about ATL vs
BTL expenditure and leakages.
REMI Studies
• CCEF - RE/EF Industries & Jobs
– Survey literature for definitional help
– Work with Navigant survey results
– Define RE/EF industries using 6-digit NAICS
– Examine CT industry size, composition &
trends
– Use counterfactual to estimate impact
REMI Studies
• CCIC – Impact of CT Private Colleges &
Universities
– Use IPEDS & CCIC survey data to estimate
direct employment, CT purchases, student &
visitor spend, research spend
– Counterfactual approach
REMI Studies
• OPM – Estate Tax Study
– Literature survey
– DRS survey
– Range of assumptions
– Results inconclusive
REMI Studies
• DOT – I-84/Rte. 8 Interchange Impact
– To help Waterbury decide on which configuration to
focus for EIS, design work & impact on local business
– Two highway reconfigurations, two buildout scenarios
each with & w/out ITC
– Worked with DOT’s TDM to converge to pop/jobs
equilibrium given each buildout scenario.
– Used GIS to determine precise location & land area
for buildouts relative to defined highway reconfig
maps (Wilbur Smith)
– Identified principal properties that would be taken in
each highway configuration & property tax and job
consequences for each buildout in each config.
REMI Studies
• CI – Investment Portfolio Impact
– Surveyed each firm in CI’s portfolio to
understand how CI helped & jobs created due
exclusively to CI’s investment
– Used CI’s portfolio data to estimate type &
amount of assistance (FY1995 – FY2008)
– Referenced 2003 portfolio impact study by
Nexus Associates
REMI Studies
• CT CCC – Culture & Tourism Impact
(2006)
– Looked at CT arts, tourism, film &
heritage/historic ‘industries’
– Defined industries by NAICS & occupations
by SOC in each
– Used visitor intercept survey to derive visitor
spend by region, by commodity, by visitor type
(marina, camper, business, tourist)
– Counterfactual approach
REMI Studies
• UConn – Impact of Univ. of CT system
– Obtained detailed data on purchasing,
research spend, visitors, direct jobs,
– Estimated student spend (by place of
residence), visitor spend, retirees’ spend,
community outreach (free clinics, prison pop.,
screenings, public ed., student volunteers)
– Estimated value of residents & interns to local
hospitals
– Counterfactual approach
REMI Studies
• Mystic Seaport – Impact of Current
Operations & Proposed Buildout
– Obtained data on current operations & visitors
• Counterfactual
– Estimated construction & subsequent
increased (net new) visitor spend
REMI Studies
• CT Dairy Industry Impact (statutorily req’d)
• Used REMI and IMPLAN (counterfactual)
• Looked at fluid milk producers &
processors and support industries (direct
jobs)
• Looked at amenity value of open space for
dairy farms
• Worked closely with UConn Ag. Econ.
faculty & DoAg
REMI Studies
• DOT - CT Rail Impact for State Rail Plan
(Counterfactual)
– Subtracted direct jobs in rail transport
industries
– Reduced commodity access using fraction of
rail shipments by weight to, from and within
CT
– Reduced labor access based on passenger
rail fraction of VMT plus passenger rail miles
REMI (Internal) Business Assistance
Studies
• Business development impacts (URA, Job Creation Tax
Credit, Film Tax Credit, CDA loans & sales tax
exemptions, EZ, CI loans, CCEF loans, Urban Act)
• Adjustments for commuting patterns, avg. compensation
differences from REMI baseline
• Assume max allowable tax credits taken pursuant to
Sec. 12-217zz
• Allow only direct CT spend except working capital
• Most FF&E, computer & office equipment purchases
assumed to wholesale at 20% gross margin.
Counterfactual Analysis
• Used when firm/institution exists
• Subtract current jobs, purchases, (ignore
commuting patterns), visitor/student spend &
other relevant direct effects
• Assume no alternative use for real property, i.e.,
no opportunity cost
• Assume current plant & equipment (incl.
animals) remain in place (no reclamation of
value)
• All activity stops - direct employees, students &
visitors walk away, purchases (cash flow) stops.
Counterfactual Analysis
• Demand-side approach – assumes
firm/institution no longer needed so relevant
firms shed all workers & B2B expenditure
• Some released labor is absorbed into other
industries
• LFPR may decline if some workers leave labor
force
• When firms reduce head count, wages decline &
out-migration occurs
Counterfactual Analysis
• Supply-side approach implies workers
voluntarily leave employment
• In this case, wages are driven up
Economic Impact
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Consists of direct, indirect & induced effects (total effect is the sum of all
three)
Direct effect - arises from initial spending by the industry studied, such as
payroll for employees and contract workers, goods and services purchases,
and rent and permit fees. Direct impacts include the jobs and/or sales in the
industries under consideration.
Indirect effect - arises as the businesses and governments that supply the
goods, services, permits, rents to an industry in turn buy goods and services
from other CT businesses.
– A caterer buying produce from a local supplier to serve food on a movie set is an
example of this kind of impact.
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Induced effect - represents the additional income earned & spent by
workers and business owners due to their participation in and support of a
particular industry.
– The profits and wages earned by a catering business supplying a movie
production create additional income for the caterer and his/her employees.
When these workers spend the income they earn in Connecticut to buy local
goods and services, they generate induced impacts for the state.
Multipliers
• Type I multipliers address the direct and indirect
effects of a change in the regional economy.
– Capture inter-industry effects only, that is, industries
buying from local industries. They do not capture
induced effects (new household spending).
• Type II multipliers take into account the direct,
indirect effects and the income and expenditures
of households (induced effects) due to changed
economic activity in the region, but they do not
capture inter-institutional transfers.
– Type II multipliers assume that as incomes rise,
spending on all goods and services increases.
Multipliers
• Type SAM (social accounts matrix) multipliers account for direct,
indirect and induced effects, and they capture inter-institutional
transfers to account for commuting, social security tax payments, as
well as household income taxes and savings.
• REMI uses SAM (broadest measure of regional economic activity)
• Rickman and Schwer (1995) document the multiplier differences in
REMI, IMPLAN and RIMS II (from the U.S. Department of
Commerce).[1] They explain the different methods used to
regionalize the national input-output matrix and the different
methods used to estimate multipliers.
[1] Rickman, D. and Keith Schwer (1995). “A comparison of the
multipliers of IMPLAN, REMI, and RIMS II: Benchmarking readymade models for comparison,” Annals of Regional Science, 29(4), p.
363-374.
Multipliers
• Multipliers exist in RIMS II[1] and IMPLAN for employment, output
(sales) and value added shocks.
• Specific to the industry chosen and the industry level, that is, the
level of industry detail or more precisely defined industry within a
larger group.
– E.g., violin making is a subset of manufacturing. Specific multipliers
exist for each smaller industry subgroup in manufacturing. Therefore,
depending on the industry specificity available in the model, one obtains
different multipliers across different models.
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[1] The U.S. Department of Commerce, Bureau of Economic
Analysis (BEA) maintains an input-output modeling system for which
paying clients may obtain customized multipliers for various subregions of the United States from the RIMS II model. BEA publishes
a set of multipliers for 39 designated industry groups for each state
(User Handbook, USDC, BEA, 1992). See:
http://www.bea.gov/bea/regional/rims/.
Multipliers
• Multipliers are region-specific, i.e., they are
larger the larger the region considered.
• They are larger the larger the quantity of locally
supplied labor and goods and services
supporting the industry studied.
• Therefore, a “shock” (for example an
employment change) to a given industry in one
region may have significant differences from
applying the same shock to the same industry in
a different region. This implies that multipliers
are not comparable across regions (or across
studies).
Multipliers
• In a regional model such as REMI, in which
shocks (inputs) are described as demand side
and/or supply side (such as productivity or LFPR
changes), and in quite complex terms,
multipliers have little meaning
• For cases in which the shock is simple and
demand driven such as an industry employment
change, one can impute an employment
multiplier for the state or the county as the
region of analysis
Measures of Success
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Jobs created
New state gross domestic product
New output (sales in all industries)
New personal income
Net new state revenue
– New gross state revenue from indigenous sources
– Less new gross state expenditure for all domestic
uses (incl. tax expenditure and debt service)
• Net new local revenue
– DECD developed a CT model to estimate
• Imputed multipliers
Documentation
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“Regional Economic Modeling: A Systematic Approach to Economic
Forecasting and Policy Analysis,” George I. Treyz, Kluwer Academic
Publishers, 1997.
Fan, Wei, Frederick Treyz, and George Treyz. 2000. “An Evolutionary New
Economic Geography Model,” Journal of Regional Science, Vol. 40(4), 671695.
Fujita, Masahisa, Paul Krugman, and Anthony J. Venables. The Spatial
Economy: Cities, Regions, and International Trade. Cambridge,
Massachusetts: MIT Press, 1999.
Greenwood, Michael J., Gary L. Hunt, Dan S. Rickman, and George I.
Treyz. 1991. “Migration, Regional Equilibrium, and the Estimation of
Compensating Differentials,” American Economic Review, Vol. 81(5), 13821390.
Rickman, Dan S., Gang Shao, and George Treyz. 1993. “Multiregional
Stock Adjustment Equations of Residential and Nonresidential Investment in
Structures,” Journal of Regional Science, Vol. 33(2), 207-219.
Treyz, Frederick, and George I. Treyz. 1997. “The REMI Multi-Regional U.S.
Policy Analysis Model,” paper presented at the North American Regional
Science Association Meetings.
Documentation
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Treyz, George I., Ann F. Friedlaender, and Benjamin H. Stevens. 1977.
“Massachusetts Economic Policy Analysis Model.”
Treyz, George I., and Lisa M. Petraglia. 2001. “Consumption Equations for a
Multi-Regional Forecasting and Policy Analysis Model,” Regional Science
Perspectives in Economic Analysis. Elsevier Science B.V., 287-300.
Treyz, George I., Chris G. Christopher, Jr., and Chengfeng Lou. 1996.
“Regional Labor Force Participation Rates,” Regional Economic Models,
Inc.
Treyz, George. I., Dan S. Rickman, Gary L. Hunt, and Michael J.
Greenwood. 1993. “The Dynamics of U.S. Internal Migration,” The Review
of Economics and Statistics, Vol. LXXV, No. 2, May 1993, 209-214.
Weisbrod, Glen, Donald Vary, and George Treyz. 2001. “Project 2-21 – Final
Report: Economic Implications of Congestion.” Transportation Research
Board, National Cooperative Highway Research Program Report 463.
Washington, DC: National Academy Press, 2001.
And see: http://www.remi.com/uploads/File/Documentation/PI+_v11_Model_Equations.pdf
Other REMI Studies
• The CT Center for Economic Analysis
(http://ccea.uconn.edu/ccea_studies.htm)
• Regional Economic Models, Inc.
(www.remi.com)