Assignment Four (Option "B"): Critique of Economic Development Study

Remember: select EITHER Option 4A OR 4B.

link to all assignments

modified: Wednesday, December 7, 2016 3:40 PM

Goals of the Assignment

• to dig deeply and critically into a selected local economic development study (that attempst to measure economic impacts (including costs and benefits), evaluate the effectiveness of development programs, and/or justify public subsidies, etc. )
• to identify terminology used in economic development research (e.g., direct vs. indirect impacts; zero-sum game; multiplier; etc.)
• to build upon ideas initially explored in Assignment Zero.

Steps of the Assignment

1. Form groups of 2 - 3 students. (This can bethe same or different from earlier assignments.)
2. Each group should locate an example of a local or regional economic development study/report. (Examples: an economic impact study; a marketing study; a labor impact study; etc. Ask me if you need help finding something.) Do NOT use the same study you ued in Assignment Zero.
3. Carefully read and probe the assumptions, methods, sources and conclusions of the study.
4. Dec 6 - 8 (in class): Make a detailed, 6 - 10 minute presentation that summarizes the key question and method of the study, and the strengths and weaknesses of the study. Prepare several slides to aid your presentation. I'll provide a link to upload your slides.
5. Your written version will be due at the end of the day on Friday, Dec. 9.
   
   

Here are suggested questions or issues to consider (NOTE: these general guidelines are the same as Assignment Zero, though obviously here you will go into more detail with greater rigor.)

1. What is the purpose (stated or implied) of the study?
2. Who is the intended audience?
3. Differentiate between studies that ask a genuinely open question ("Was this program worthwhile and should we refund it for another five years?") vs. studies that seem to be rationalizations (justifications) of decisions already decided ("What are all the benefits of this project that justify its expense?")
4. Some studies ask a specific question (e.g., will a public-subsidized stadium generate new jobs and revenues?); others ask a broader question (what is the most effective use of public funds to increase local employment and revenues?). Do these two approaches often lead to different results?
5. How do the studies address time? e.g., short-term vs. long term costs and benefits?
6. How do they employ discount rates (if at all)?
7. Does the development attract new residents (from outside the city, or perhaps outside the region) vs. attracting residents from within?
8. Where relevant, how do the authors use (and make assumptions about) such terms as multiplier, direct vs. indirect vs. induced benefits, etc.
9. What assumptions do the authors make about larger economic trends (e.g., growth in demand, interest rates, etc.)?
10. Do the authors clearly explain the sources of data used in the study? Is this data publicly available?
11. Do they assume new economic activity (i.e., a net gain) when the program/policy/event/etc. might simply shuffle existing activity around (i.e., a zero-sum game)?
12. Is there evidence of double-counting benefits and/or omitting costs (such as opportunity costs)?
13. Does the report consider equity impacts? impacts on local residents vs. new arrivals? etc.
14. Does the report consider environmental impacts?
15. Note:  examples might include studies of public projects (e.g., infrastructure spending, a new bridge, government research facilities, job training program, etc.) or of public-subsidized private developments (e.g., of a stadium, casino, research park, film industry subsidies, tax increment financing, etc.).  Such studies might look at either the fiscal impact (costs and revenues for governments) and/or economic impact (jobs, wages, R&D investment, etc.).
16. If you were to do a detailed, rigorous critique of the study (perhaps attempting to replicate the results), what skills, methods or data would you need? Does your preliminary examination of the study (for this class exercise) highlight areas of economic development methods you hope to master? [Since we are doing this brief exercise at the beginning of the semester, many of the terms and methods in the study understandably will be unfamiliar to you. Some of these we will cover throughout the semester, while others may be beyond the scope of this course. These skills will be useful to complete Assignment Four.]

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Terms, Methods, Data Sources often cited:

• opportunity costs (though often ignored)
• counterfactual (sometimes ignored; sometimes assumed to be no change in activity)
• IMPLAN -- a proprietary input-output model.
• BLS -- Bureau of Labor Statistics
• ACS -- American Community Survey (from the US Census Bureau)
• leakage (money “leaking” from the local economy)
• multipliers
• FDI - foreign direct investment
• import-substitution
• export-based (linked to multipliers)
• NAHB - National Association of Home Builders
• LIHTC - Low-Income Housing Tax Credit
• direct vs. indirect (impact on suppliers) vs. induced (increase in hhd income leading to spending) benefits
• double counting (e.g., counting the same benefit twice, such as increased business sales and retail spending on the same goods or services).

You might find these pages useful

• Understanding Economic Analyses and Models (EPA)
• ECONOMIC IMPACT CONCEPTS (MSU)
• Economic Development Research Group: Impact Studies

a few background readings to provide examples (see also Nov 29 - Dec 1 for more resources):

• CSL International on behalf of the Detroit Riverfront Conservancy, Economic Impact Study Detroit Riverfront 2013
• Community Land Use + Economics Group, LLC, Retail Market Analysis for Downtown Atlantic City
• Partnership for a New American Economy + Center for American Progress, The Economic Benefits of the DREAM Act
• Los Angeles County Economic Development Corporation, Los Angeles Union Station Master Plan: An Economic Impact Analysis
• Meter, K. and Goldenberg, M.P. (2015). Critical Analysis of Economic Impact Methodologies. In Exploring Economic and Health Impacts of Local Food Procurement. Chicago, IL: Illinois Public Health Institute. [link]
• American Booksellers Association: Local First and Economic Impact Studies

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