MULTIPLIERS AND IMPACT ANALYSIS

 

One of the main uses of an Input-Output Table is to assess the combined effects of the direct and indirect repercussions of a change in final demand. Examples of a change in final demand are a new mining project for a local economy or an increase in number of enrolments of foreign students in the higher education sector.

Multipliers are calculated directly from Input-Output Tables using algebra. Unlike other economic models, they do not require any types of parameters to be set or estimated. Therefore, multipliers derived from Input-Output Tables are among the most transparent indicators for Impact Analysis.

The notion of multipliers rests upon the difference between the initial effect of an exogenous change and the total effects of that change. The total effects can be defined as direct, indirect and induced effects. The multipliers that incorporate direct and indirect effects are known as simple multipliers or type 1 multipliers, while the multipliers that incorporate direct, indirect and induced effects are called total multipliers or type 2 multipliers.

The output multipliers are defined as the total amount of output from the economy to satisfy an extra dollar's worth of final demand of the output of an industry. Other common multipliers are (a) income multipliers; (b) employment multipliers; and (c) value-added multipliers. They measure the total effects on wages, physical employment, and value-added separately.

Input-Output Multipliers are not limited to a single region. With Multi-Regional Input-Output (MRIO) Tables, multipliers can be calculated for impacts in one region that are caused by changes in another region.