NRPA Measuring Impact of Park & Rec

Measuring the Economic Impact of Park and Recreation Services www.NRPA.org National Recreation and Park Association © 2010 All Rights Reserved 40 Indirect Effects: Indirect effects are the ripple effects of additional rounds of recirculating the direct effects dollars by local businesses and local governments. Induced Effects: Induced effects are the other ripple effects generated by the direct and indirect effects, caused by employees of impacted businesses spending some of their salaries and wages in other businesses in the city. Sometimes critics in a community argue that the only beneficiaries of visitor spending in a community are businesses and their employees who are the direct recipients of that spending. Indirect expenditures expand this to other businesses that trade with the initial business recipients, while induced income effects are “the tide which raises all boats.” These effects disseminate the “new money” widely throughout the community. The three different effects are illustrated in Exhibit 4-2 . For example, the middle column of this exhibit shows that each dollar spent in this city generated 29 cents in direct personal income, another 8 cents in indirect personal income, and an additional 21 cents in induced income. Operationalization of the Multiplier The term “multiplier” should more accurately be termed a “multiplier coefficient.” A sales multiplier coefficient is calculated by the following formula: Direct sales + Indirect sales + Induced sales Direct sales Interpolating the numbers from Exhibit 4-2 to the formula indicates that the sales multiplier is 1.55. 1.24 = 1.55 .80 Thus, every $1 of visitor spending, or 80 cents of direct effects, would generate $1.55 in sales in the economy. Similarly, a personal income multiplier would use the following formula: Direct income + Indirect income + Induced income Direct sales Exhibit 4-2 Average Multiplier Coefficients Across Six Visitor-Related Sectors in a Texas City of 90,000 population a Sales Personal Income Jobs Direct Direct + Direct+ Direct Direct + Direct+ Direct Direct+ Direct+ Indirect Indirect+ Indirect+ Indirect+ Indirect Indirect+ Induced Induced Induced .80 1.06 1.24 .29 .37 .58 18.71 22.36 31.07 a The direct effects were estimated to be 80% of total visitor spending.