Let's Get to the Bottom Line First!

LEAP is meant to be a radical departure from existing economic models. Whereas traditional input-output, forecasting and fiscal models focus on measures of dollar flow (for income, spending and costs), LEAP also considers factors in business location and expansion decision-making that deal with availability, quality and accessibility of local facilities, services and markets. For some uses, such as diagnostics of local strengths/weaknesses and formulation of economic development strategies, these additional factors can be critical considerations. LEAP can thus be used as a superior tool for some economic development applications, and also as a complement to economic models such as IMPLAN for economic impact studies.

The Traditional Economic Impact Model.

By definition, a regional economic model does three things:

(1) It portrays a profile of the industry mix and/or trend existing in a given region,(2) It analyzes the regional economy by comparison to national patterns and trends, (3) It uses the regional information, along with national information on economic patterns, to forecast or estimate the consequences of future actions.

Input-output (I-O) models (such as IMPLAN and RIMS) have three basic structural components. They (1) profile the industry mix of a region, (2) compare it to that of the nation and use that comparison to evaluate the extent of local purchases going to suppliers within and outside of the region (known as regional purchase coefficients), and (3) then use national accounting profiles of inter-industry sales and purchases (known as the technology matrix) to develop estimates of the downstream "multiplier" effects of any given area's business expansion or contraction on changes in the broader economy (jobs, income and business output).

Input-output models are most useful for two primary purposes: (a) to measure the role or contribution of a given industry to business activity in the broader economy, or (b) to estimate how a business expansion/contraction in a given industry will affect the broader economy. However, I-O models do not forecast changes in the local economy over time, nor the economic impacts of changes in local cost factors, although they can be combined with other tools to assess the impacts of such changes.

Economic forecasting models (such as REMI, REDYN and INFORUM) also utilize I-O model information, plus they add the ability to forecast future adjustments in business costs, prices and growth on a year-by-year basis. Again, they feature the same three basic structural components. They (1) profile local patterns of business operating cost and business activity trends over time, (2) compare the local industry growth trends to national counterparts, to identify how local economic change tracks with national industry changes, and (3) then combine this information with national research findings on how businesses respond to cost and demand changes, to develop estimates of effects on local business expansion or contraction over time.

Forecasting models usually employ some form of general equilibrium assumptions concerning supply, demand and prices for labor and materials. That makes them most useful for two purposes: (a) to estimate economic growth/ contraction impacts of specific scenarios that directly affect taxes, prices, costs or productivity, or (b) to estimate long-term economic adjustments in business and population in-flow and out-flow, for any type of scenario that causes a big enough expansion/contraction "shock" to the local economy to trigger changes in prices and costs of labor, housing, transportation or business operating cost factors.

These models are fundamentally designed for policy analysis and forecasting changes over time. They can replicate an I-O model's analysis of the "economic role or contribution of an existing industry" through "tricks" such as pretending that the existing industry will disappear or double in the future.

Other Related Types of Economic Models.

There are two other types of models that estimate or forecast impacts related to economic growth and development. They are:

(1) Fiscal impact models (such as STAMP, Fiscals, FIAM and Fiscal Impacts) estimate how economic change leads to revenue and cost changes for local, county and state government agencies. They can be seen as economic models in the broad sense that they deal with numbers, but they are actually specialized financial models that are driven by assumed changes in a local economy and population base. (Some economic impact models, including the IMPLAN I-O model and the REMI Simulation Model do have a summary level estimate of the tax consequences of economic changes, though that that is far less detailed than the information provided by a true fiscal impact model.)

(2) Urban development models (such as UrbanSim and MEPLAN) forecast future changes in land development patterns as a regional economy and population base grows. Land development patterns can be defined in terms of population, employment and density of development within small zones. (Urban development models do resemble multi-regional economic forecasting models such as REMI in the broad sense that they both provide forecasts of employment by zone. However, urban development models typically have fine-level detail on building space and geographic zones, but only very coarse detail on categories of business. That is the opposite of the multi-regional economic forecasting models, which have fine-level detail on business but only county-level economic zones.)

Similarities and Differences between Economic Impact Models and LEAP.

Both I-O and economic forecasting models have some common limitations. They use comparison of the local area to national patterns as the basis for estimating measures such as regional purchasing patterns, relative cost competitiveness, etc. They all assume that some given change in the economy automatically leads to economic impacts. The factors driving economic change are all money-related - jobs, wages, costs and output. And users must experiment with alternative intervention scenarios in order to develop information on prioritizing their actions.

LEAP is intended to address all of these limitations. But LEAP does not "reinvent the wheel." It does not duplicate or fully replace input-output models or economic forecasting models. In fact, LEAP is designed so that it can be (and is) used together with these other types of economic models when appropriate. However, LEAP was designed to work in a market niche that is ill-served by existing economic impact assessment tools.

What makes LEAP special?

LEAP is a radical departure from any existing economic impact analysis tool or model in three ways.

· LEAP focuses on identifying local shortcomings and opportunities for improvement. It not only provides a report card on your area's economic performance, but lets you benchmark your area to comparable urban or rural regions elsewhere (rather than to state averages or national norms). It then analyzes area economic performance to identify the performance gaps and local factors that account for these gaps.

· LEAP is an economic developer's tool. It considers how economic growth is affected not only by dollar flows and prices, but also by factors that local planners and economic developers can affect -- the availability and adequacy of local education, workforce skills, infrastructure, business sites and facilities, support services and transportation accessibility.

· LEAP provides direction for targeted actions. It identifies potential opportunities for targeted business attraction, and estimates the likely range of impact from actions meant to enhance local economic development. It does not naively portray the future through automatic forecasts of economic change, but rather in terms of opportunities, risks and factors that can affect them.

These features make LEAP ideal for: (1) evaluation of local economic performance, (2) targeting efforts for business attraction, and (3) prioritizing policies and investments in terms of their impacts for improving economic development. In addition, there are many more technical factors that further enhance the usefulness of LEAP.

(A) For instance, LEAP recognizes that many economic developers work to improve industry diversification and develop complementary industry clusters, seeking to increase new business activities that complement existing sources of economic growth. That is in contrast to input-output and economic forecasting models that take regional purchase coefficients and technologies as given factors.

(B) In addition, LEAP is an open model. It allows for economic development strategies to attract new foreign investment, grow export trade and embrace new technology use. That is in contrast to input-output and policy forecasting models that normally assume a fixed or closed national economy, in which one area can only gain jobs at the expense of other areas elsewhere in the nation.

(C) Finally, LEAP is flexible. It does not impose a fixed time path for impacts to the economy, recognizing that economic developers have an ability accelerate or delay economic impacts depending on the extent to which they intervene to address other factors that constrain economic growth.