The Dispersion of Regional Economic Impacts

Transcription

1 The Dispersion of Regional Economic Impacts REMI/C2ER Webinar August 21, 2018 Robert T. Carey, Ph.D. Director, Regional Economic Analysis Laboratory Clemson University Clemson, South Carolina

2 Some Theoretical Concepts 1. REMI is an input-output (IO) & computable general equilibrium (CGE) model We won t get into the CGE part (well, maybe a little) 2. REMI is a new economic geography (NEG) model Both of these concepts are important to understand when looking at REMI s modeling results We ll take a view from 30,000 feet look at these concepts in regional economic theory and how they apply to Amazon HQ 2.0

3 Dispersion Within the Regional Economy

4 Some Quick Definitions Direct Effect Initial change in output (income) & employment Indirect Effects Impact on suppliers (income/output & employment) Induced Effects Impact from workers spending their wages

5 Direct, Indirect & Induced Effects $20 Taxes Y = 0 ( output, or income from sales) Savings (or loan payments) $30 Purchase inputs (incl. some labor) from out of region (imports) $25 $15 Other Inputs Households $15 Publix Local Supplier Publix $5 Local stuff $5 Local Supplier $2 $1 $2 Local stuff

6 Direct, Indirect & Induced Effects Bob s Bait & Fishin Supply Co. Y = 0 Bob sells some tackle Direct sales $20 Taxes Mortgage payment $30 Purchase merchandise from Zoom $25 $15 Local Coke Distr. Total Impact on Output = = 128 Total Impact = Direct + Indirect + Induced Induced (Amazon) $15 Publix (Bottles) $5 Cleaning Service (Wholesale) $5 Indirect $2 $1 $2 Supplies

7 Direct, Indirect & Induced Effects Bob s Bait & Fishin Supply Co. Y = 0 Bob sells some tackle Direct sales $20 Taxes Mortgage payment Purchase merchandise from Zoom $25 $15 Local Coke Distr. Total Impact on Output = = 128 Total Impact = Direct + Indirect + Induced Induced $15 Publix (Bottles) $5 Cleaning Service (Wholesale) Basically (very basically), this is what $30 REMI does! (Amazon) $5 Indirect $2 $1 $2 Supplies

8 For Example Amazon HQ Indirect Professional services (e.g., legal, IT) Real Estate Admin & Support Services Building Maintenance Induced Retail (groceries, other) Restaurants Health Care Construction Personal Care Services

9 Geographic Dispersion

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11 New Economic Geography (NEG) Importance of where, not just what (location matters!) First nature geography (natural features) Second nature geography (economic interactions between governments, industry, labor, producers & suppliers, etc.) Factors of where : Distance to market Distance to important resources Determinants of where : Land (resource) cost Transportation cost

12 New Economic Geography (NEG) Movement of factors of production between regions: Move toward locations yielding higher return on investment (ROI) Results in increasing specialization between regions over time Transportation costs factor in: A county with interstate access will develop differently from one without Ditto a port, river, or airport Labor tends to move toward higher relative wage rate Krugman: firms want to concentrate production near markets and suppliers which is best where other firms locate (p.166) Paul Krugman. (1998). Space: The Final Frontier. The Journal of Economic Perspectives, 12(2):

13 Movement of Economic Effects Between Urban & Rural Areas Backwash Spread

14 NEG Gravity (or why backwash tends to be > spread) Reilly s Law of Retail Gravitation: Two cities attract retail trade from any intermediate city or town in the vicinity of the breaking point, approximately in direct proportion to the populations of the two cities and in inverse proportion to the square of the distances from these two cities to the intermediate town 2 (Doesn t just apply to retail) In other words: some of Amazon s impact will leak into surrounding suburban & rural area & other cities, but a lot of it will tend to concentrate within the city where it is located. 2. William J. Reilly. (1931). The Law of Retail Gravitation. New York: Published by author.

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16 Map data 2013 Google

17 The Clemson University Regional Economic Analysis Laboratory (CU-REAL) conducts public policy and economic and fiscal impact analysis for public, private, and non-profit sector clients. CU-REAL is a unit of the Division of Collaborative Academic Services (DCAS), which serves the College of Behavioral, Social & Health Sciences and the College of Education. carey2@clemson.edu Web: cu-real.com