bc-forest-industry-economic-impact-study

15
4. ECONOMIC IMPACT ANALYSIS
ECONOMIC IMPACT ANALYSIS METHODOLOGY
MNP’s estimates of economic impacts have been developed using BC Stats input-output model and related
economic multipliers. An input-output model is based on statistical information about the flow of goods and
services among various industries, and is normally used “to simulate the economic impact on the business
sector of an expenditure on a given basket of goods and services or the output of one of several
industries.” 44
Input-output modeling is a widely-used and widely-accepted approach, making it recognisable by many
different stakeholders and audiences. The structure of the approach also facilitates comparisons between
reported results for different projects and facilities.
Economic impacts are generally viewed as being restricted to quantitative, well-established measures of
economic activity. The most commonly used of these measures are output, GDP, employment and
government tax revenue:
Output is the total gross value of goods and services produced by a given company or industry
measured by the price paid to the producer. This is the broadest measure of economic activity.
Gross Domestic Product (GDP) or value-added refers to the additional value of a good or service
over the cost of inputs used to produce it from the previous stage of production. GDP is the
unduplicated total value of goods and services produced. GDP is a more meaningful measure of
economic impact than output, as it avoids double counting during each round of production.
Government Tax Revenue arise from personal income taxes, corporate income taxes,
consumption taxes (e.g. PST and GST) and indirect taxes on production.
Employment is the number of additional jobs created. Employment is measured in terms of fulltime
equivalents (FTEs).
Economic impacts may be estimated at the direct, indirect and induced levels.
Direct impacts are changes that occur in “front-end” businesses that would initially receive
expenditures and operating revenue as a direct consequence of the operations and activities of an
industry.
Indirect impacts are changes in the activity of suppliers to front-end businesses. Indirect impacts
include the spending that suppliers make when purchasing goods and services.
Induced impacts arise from shifts in spending on goods and services as a consequence of
changes to the payroll of the directly and indirectly affected businesses. In the case of the BC forest
industry, induced impacts reflect the additional spending by the employees of the BC forest industry
and by the BC forest industry’s suppliers.
A detailed description of our methodology and assumptions is provided in Appendix B.
44
Statistics Canada. (2013, April). Input-Output Model Simulations (Interprovincial Model). Retrieved from
http://www5.statcan.gc.ca/bsolc/olc-cel/olc-cel?lang=eng&catno=15F0009X
BC FOREST INDUSTRY: ECONOMIC IMPACT STUDY
MNP LLP