Investor Presentaiton
The induced impact reflects additional economic
activity that results from increases in the spending
of household income. For example, when the
aforementioned paperboard mill purchases materials
from one of its suppliers and the overall demand for
this supplier firm rises, some of the staff working for this
supplier will see a rise in their income levels. Part of
this income will then be spent locally on, for example,
food, entertainment, or housing. These industries will
then also see an increase in demand for their goods
and services, which will lead to higher incomes for
some of their employees, part of which will also be
spent locally.
These successive rounds of indirect and induced
spending do not go on forever, which is why we can
calculate a value for each of them. In each round,
money is "leaked out" for a variety of reasons. For
example, firms may purchase some of their supplies
from vendors located outside of South Carolina. In
addition, employees will save part of their income
or spend part of it with firms located outside of the
state. In order to determine the total economic impact
that will result from an initial direct impact, economic
multipliers are used. An economic multiplier can be
used to determine the total impact (direct, indirect, and
induced) that results from an initial change in economic
activity (the direct impact). Multipliers are different
in each sector of the economy and are largely
determined by the size of the local supplier network
as well as the particular region being examined.
In addition, economic multipliers are available to
calculate not just the total impact, but also the total
employment and income levels associated with the
total impact.
To estimate the impact of the agribusiness cluster on
the state of South Carolina, the Division of Research
used a detailed structural model of the South Carolina
economy containing specific information on economic
linkages across the state's 534 industrial sectors. This
study also utilized the input-output modeling software
IMPLAN in calculating estimates.
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