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Kirsten Kaman 164491ECT- Article Assignment 3
‘Economic impact analysis of sports facilities and events: Eleven sources of
misapplication’
Misrepresentation of employment multipliers:
The employment multiplier assumes that all existing employees are fully utilized so an increase in
external visitor spending will lead to an increase in level of employment. This is not always the case
because additional demand may be met by greater utilization of the existing labor force.
A realistic procedure that can be used to prevent this problem from happening is that you have to
research whether the company has increased the labor force due to an increase in external visitor
spending or if the company let the employees work extra times. You can research this with a survey,
which you give the employees and look what the outcome is of this. In this way you get a look on what
the employees have done regarding to the “employment multiplier”.
Using incremental instead of normal multiplier coefficients
The incremental approach indicates that if a certain amount of money of direct income is created, a
proportion of other income will be created in other parts of the economy. A true indication of the impact
is not given, because it does not include information on size of internal leakage. The incremental
multiplier puts emphasis on the least important aspects, the indirect and induced effects.
A realistic procedure that can be used to prevent this problem from happening is first finding out by
doing research if there is a leakage and how big the internal leakage is in a company. Then, if you
found the information about the internal leakage, you have to indicate the incremental approach. What
is the correlation between the direct income and the proportion of the other incomes created in other
parts of the economy. And in what other parts of the economy are affected by the increase in income if
the direct income increases. This can be done by statistical research.
Failure to define the area of interest accurately
An economic impact study provides no formal definition of the region on whose economy the impact of
a certain event is supposed to occur. Changes in geographical boundaries of the area lead to changes
in multiplier size, because of magnitude of the multiplier depends on the structure of the host
community.
A realistic procedure that can be used to prevent this problem from happening is that the boundaries
of a region needs to be cleared. In this way the host community has a fixed area and because of this,
the multiplier size is fixed. The economic impact study then gets a definition and you can find out what
a certain event has as an impact on the economy of a certain region. Fixed boundaries also means a
fixed multiplier size, which automatically leads to a more fixed structure of the host community. To
realize this, there needs to be an interview with some people in the region counsellors and have
insight in the data owned by the government to calculate the impact.
Use of “Fudged” multiplier coefficients
You cannot take the results of an economic impact assessment from similar studies in other places
and apply it, because businesses interrelationships in communities are structured differently, so
linkages and leakages will be different. You cannot make a general statement, so each situation
should be analyzed independently.
A realistic procedure that can be used to prevent this problem from happening is that you have to do
the same research which is done in one of the area’s, again, but then with all the data and statics from
the destination you are researching. Not every country is the same and not every interrelationship
between companies and in communities are the same, so applying one economic impact assessment
to other places is not realistic. To prevent this problem, you can make a model in general of what to
research and what you need in order to draw a conclusion out of your research. In this way, if you
applied the new model on 2 destinations or communities, you can compare those because you
researched both the components in the destinations itself. In this way you have a realistic approach in
both areas and still are able to compare both with linkages and leakages if needed.
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