What are the Advanced Economic Impacts ?
In practice, advanced economic impact means measuring economic impact over time and making judgements about longer-term economic activity, or economic decisions that event organisers and sponsors may or may not have made were it not for the event taking place (i.e. additionality and displacement effect).
Thus, the total economic impact aims to capture knock-on effects to the host economy (i.e. the additional money spent in the local area by local businesses as a result of the increased sales during the light festival or event). Usually the information required to undertake these adjustments is not readily available, can be speculative and has additional resource implications.
Application of multipliers to measure additionality effect
A multiplier is used to estimate the supplier or output effect (increase in business sales has an effect on the local supplier chain, so it measures the impact on the total business turnover in the host economy) and income effect (increase in business sales can lead to an increase in employment or income, a proportion of which is spend in the local economy, so the income multiplier measures the overall increase in household income of local residents).
A multiplier is a simple ratio that measures total changes in the economy related to some initial change. It will thus be affected both by what effects you choose to include and what the effects are related to. The multiplier may be categorised according to what effects are included.
Generally three effects are considered: direct, indirect and induced effects. The more effects are included, the higher multiplier. Studies typically determine multiplier values through one of three methods – input-output tables for a particular area; surveys of businesses and employees; and secondary benchmarks.
GVA (Gross Value Added) benchmarks are used to calculate the impacts on the economy (e.g. additional spend on employment in different sectors of the economy). For example GVA per employee in the hospitality sector can be 92,000 EUR whilst it can be in the retail sector 180,000 EUR.
The value of both supplier and income multipliers is dependent on the size of the economy being considered. In general, the smaller the host economy, the higher the chance of leakage and the lower the value of the multiplier.
Multiplier values can be borrowed from other studies, for example Glasgow has used data from the Scottish Multiplier Study (STMS), which provides standard supplier and income multipliers for the tourism sector. This estimates that the combined supplier and income multiplier for an urban location are 1.46 at the local level and 1.73 at the Scottish level. Osaka arrived at the Multiplier figure by dividing Economic Impact by Direct Investment, which is 1.36. In addition, Artichoke (organizers of Durham Lumiere) estimated that 57% of the production costs were spent in the North East which suggests an income multiplier of 1.57.
Gross Value Added (GVA) benchmark was not well recognised and appeared in the Glasgow and Osaka studies only. GVA was estimated as 19.2 million EUR in Osaka and 873,000 EUR in Glasgow. The difference can be to some extent explained by the size of the event (Osaka event had ten times the daily visitor numbers of the Glasgow event) and characteristics of the host economy. In the Glasgow study, the net additional annual GVA has been calculated on the basis of GVA per employee within the tourism industry, benchmarked against Scottish Annual Business Statistics (2005).
Displacement
Larger events in particular should also consider any displacement effect, i.e. the light festival or event crowding-out of non-event visitors.
Economic Displacement arises when a light event, which causes the expansion of one economic activity (e.g. market trading in Medellin) or activity in one location (e.g. of the city) also has the effect of bringing about some degree of reduction in economic activity elsewhere.
Employment creation
The creation of new jobs and the safeguarding of existing jobs is almost always a key objective of local authority economic development strategies. Often it is the most important single objective.
Jobs created or safeguarded are usually referred to in terms of ‘full time equivalent’ [FTE] jobs. This can be defined as a job involving a standard 30 hour week or longer. Part time jobs are described in full time equivalent terms. For example 2 part time jobs each working a 16-hour week would be described as one FTE.
Net additional jobs created figures are available for Glasgow, Medellin and Montreal only. The table below divides the operational cost against number of jobs created. As a benchmark, a typical UK employability project [1] , where the main focus is to support workless people into jobs has a cost/job ratio of around 5,500 EUR.
Evidence from elsewhere [2] suggests that the highest level of job creation is associated with medium sized festivals (festivals with an audience of 100,000 to 500,000). Montreal and Medellin are both large festivals with over one million audiences whereas Glasgow audience is less than 100,000.
When measuring jobs resulting from the economic development and activity around light events, the focus is often mainly on jobs that are created and/or safeguarded as a direct effect. In addition, there can be indirect and induced effects of interventions (similar to the total economic impact):
- Direct impacts – jobs generated directly by the investment on the light event activity.
- Indirect impacts – jobs created/safeguarded in other linked businesses – supply multiplier effects.
- Induced impacts – jobs created/safeguarded as a result of additional employee household income/expenditure – income multiplier effects.
Other approaches to measure advanced economic impacts
Osaka and Montreal impact assessments analysed event sustainability by comparing event cost to the estimated amount of tax revenue generated. When the local economy is vitalized by the event, local and national government will benefit from a tax increase.
- Osaka impact study estimated that as a result of the event, the Japanese government gets an additional income of around 2, 6 million EUR and Osaka Prefecture and City Government an additional income of 600,000 EUR and 300,000 EUR respectively. The findings indicate that total additional tax revenue is higher than public investment, although when considering Osaka City independently, it’s contribution is more than it’s revenue.
- Montreal impact study estimated that Montreal High Lights have given a contribution of approximately 3,779,000 EUR through tax, including 2,685,000 EUR towards Quebec tax revenue and 1,121,000 EUR towards Canada tax revenue.
Osaka attempted to assess the success of its event by testing audiences willingness to pay for the event. CVM (Contingent Valuation Method) is used to estimate the value which people are willing to pay for the entrance fee though this event is actually free. Osaka visitor survey included questions asking visitors for their maximum willingness to pay for the event. The value estimated amounts to 3EUR (medium) or 5.20 EUR (average).
