Economic impact analysis (EIA) examines the effect of a policy, program, project, activity or event on the economy of a given area. The area can range from a neighborhood to the entire globe. Economic impact is usually measured in terms of changes in economic growth (output or value added) and associated changes in jobs (employment) and income (wages).
The analysis typically measures or estimates the level of economic activity occurring at a given time with the project or policy occurring, and calculating the difference from what would otherwise be expected if the project or policy did not occur (which is referred to as the counterfactual case). This analysis can be done either before or after the fact (ex ante or ex post). The term economic impact can be applied to analysis of the economic contribution of a given activity or industry to the existing local economy.
EIA is one element of an environmental impact assessment, which is required to examine impacts of proposed development projects. It is also commonly conducted when there is public concern about potential economic impacts of a proposed project or policy.
EIA differs from Cost-benefit analysis(CBA) In one sense, EIA is broader in that it counts business relocation and resulting spending multiplier impacts on a given area, while CBA is usually not constrained to any specific study area and thus ignores effects of business activity shifts among locations. On the other hand, CBA is broader in that it also counts non-economic benefits that have a value to people though they do not directly affect the flow of money in the economy (such as the value of effects on personal travel time savings, safety, security and quality of life improvements).
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